|

FOMC 'accommodative' removal from statement - dollar went lower, what's that all about?

There has been some confusion in the markets as to what the Fed has signified by the removal of "The stance of monetary policy remains accommodative," from today's statement - and not surprisingly so when the initial reaction in the greenback was a spike lower when one might expect that should the Fed be reigning in its attempts to expand the overall money supply to boost the economy, it means that they are bullish on their outlook for growth - and that is evident in the recent projections for GDP as follows:

  • 2018 - 3.1% vs 2.8% prior
  • 2019 - 2.5% vs 2.4% prior
  • 2020 - 2.0% vs 2.0% prior

Analysts at TD Securities offered a side-by-side comparison of the FOMC statements - take a look:

It all looks rather hawkish at first glance and indeed the economic projections are bullish, here are the unemployment rate upticks:

Unemployment rate:

  • 2018 - 3.7% vs 3.6% prior
  • 2019 - 3.5% vs 3.5% prior
  • 2020 - 3.5% vs 3.5% prior

However, here are the PCE inflation projections, not so hawkish:

  • 2018 - 2.1% vs 2.1% prior
  • 2019 - 2.0% vs 2.1% prior
  • 2020 - 2.1% vs 2.1% prior

Nevertheless, the median projections are for one further rate hike this year and an additional three hikes next year and that is hawkish where otherwise, the doves out there in the market might have been expecting perhaps just two more hikes in 2019.  However, the 2021 dot indicates an end to the rate hike cycle with some Fed officials pencilling in cuts - and if the likes of the ECB (growth depending), BoC, BoE (Brexit depending) are playing catch up - then that could be the motivation for the initial spike lower in the greenback. However, it now seems that the market wants to be long of dollars figuring that the US is streaks ahead in its growth and rate hike cycle - You don't get a better yield elsewhere.

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Editor's Picks

EUR/USD extends its optimism past 1.1900

EUR/USD retains a firm underlying bid, surpassing the 1.1900 mark as the NA session draws to a close on Monday. The pair’s persistent uptrend comes as the US Dollar remains on the defensive, with traders staying cautious ahead of upcoming US NFP prints and CPI data.
 

GBP/USD tilts bullish as markets barrel toward mid-week NFP print

GBP/USD is holding a broader bullish structure on the daily chart, with price trading well above the 50 Exponential Moving Average at 1.3507 and the 200 EMA at 1.3310, confirming the intermediate uptrend that has been in place since the November 2025 low near 1.2300. 

Gold pushes back above $5,000

The daily chart shows spot Gold in a parabolic uptrend that accelerated sharply from the $4,600 area in late January, printing a record high at $5,598.25 before a violent reversal erased nearly $1,000 in value during the final days of the month. 

Litecoin eyes $50 as heavy losses weigh on investors

Following a strong downtrend across the crypto market over the past week, Litecoin holders are under immense pressure. The Bitcoin fork has trimmed about $1.81 billion from its market capitalization since the beginning of the year, sending it below the top 20 cryptos by market cap.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.