There’s plenty of drama in overnight moves, even though the FOMC Statement didn’t really contain any great surprises. The Fed’s job was to keep all its options open. This it has achieved. Much of the language was a straight copy and paste from December, though the description of the economy and labour market has been dialled up a notch, and the FOMC has shown itself prepared to look through near-term declines in inflation. On balance, and taken in isolation, this assessment would support a more hawkish line on the outlook for monetary policy. But, by cleverly referring to “international developments”, there was a hint, perhaps, that it is not immune or insensitive to the external value of the currency – one of the key transmission channels in which Fed policy can affect international developments.
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