USD updated the 2-week low after the Fed's decision on rates
US dollar fell to a new 2-week low after the Fed meeting. As widely expected, the Federal Open Market Committee (FOMC) kept the federal rate unchanged in the range of 0.00% - 0.25%. The final instruction stated that coronavirus is a major threat in the medium term and that the pandemic crisis will have a strong impact on economic activity.
As a result, EUR/USD exchange rate rose to 1.0880. At the same time, U.S. currency on Wednesday fell against the Big Ten except CHF, which symbolically fell by 0.03%. However, New Zealand dollar went up ang strengthened position against its American rival by 0.95%.
Market participants hoped that in today's final communiqué, the Fed would indicate specific inflation and unemployment targets that could give an understanding of the conditions for a renewed rate increase in the future. However, the Fed maintained the vague wording from the previous meeting on 15th of March, noting that rates will be around zero until there is confidence that the economy has survived the recent crisis and nothing prevents it from moving towards employment and inflation targets.
As for the Fed's current asset purchase program, the previous wording from the March meeting was also applied. Specifically, purchases of treasury bonds and mortgage-backed securities will continue to be made to the extent necessary to maintain smooth market functioning.
Accordingly, treasury bonds prices have fallen slightly after the announcement, the yield on 10-year trader's bonds has risen to 0.62% and stock markets reacted positively, as the U.S. Central Bank did not give any reason to assume that the liquidity flow in the market may become less turbulent in the near future.