Last night, FOMC left interest rate unchanged just as expected, but the press conference was a really dovish speech. The FED highlighted the uncertainty in the global economy most especially china. Inflation was also a major factor the FED chairman put more emphasis on, because global inflation is relatively low and might stay lower for longer than expected, Fed funds projection also pointed lower as well as global growth.
The overall market reaction to interest rate decision and the press conference was mixed. When interest rate decision was released USD was relatively weak across the broad, Eurusd rallied all the way through 1.14 and it was interesting to see commodity currencies coming out really strong against USD when Interest rate decision was announced. However, when she started the press conference, AUD gave away most of its gain from the initial rate decision statement; this could be attributed to the fact that she mentioned the fact that China’s economic situation is a big challenge to global economic growth.
Over the coming trading days, the market might continue in a mixed outlook because of the overall global outlook. Risk off currencies might continue to get strong and commodities might continue to slide to the downside (JPY, CHF). Euro might be the best performing currency till FED raise rates and it might trade as high as 1.19 against USD. Commodity currencies will continue to trade in a range because of uncertainty in china.