A week ago, the FOMC released a stunning statement, that meant printing $1 trillion dollars. This shocked the forex markets, and sent the dollar down. Some called it a death sentence for the greenback. One week after, let’s review where the buck is going.
On Wednesday, Match 18th, the Federal Open Market Committee released its statement. There was no surprise with the rate decision – it stayed at a maximum rate of 0.25%, but the text that followed it was stunning.
The big shock was the announcement of buying treasuries and buying mortgage backed assets.The money would come from: well, nowhere. It would be printed, enlarging the Fed’s balance sheet by a trillion bucks – printing it.
This dollar printing sent all currencies rallying against the greenback. It happened in an initial first wave, and continued with second smaller wave a few hours later.
Did the dollar collapse?
EUR/USD: It jumped about 600 pips in half a day – from a little over 1.31 to above 1.37. Since then it’s struggling, currently trading at 1.3570. The biggest mover kept a significant share of its gains.
GBP/USD: The British Pound leaped 500 pips, from a little under 1.40 to a little under 1.45 in half a day. Afterwards, it continued rising, and even reached 1.4750. Since then it calmed down, but kept all the gains since the FOMC statement. This event helped the Pound a lot. Before it, the Pound was quite beaten.
USD/JPY: The Yen joined the gang with a 450 pips gain, from 98 to 93.50 in half a day. But this didn’t hold,. The Yen erased all the gains quite quickly.USD/JPY went as high as 99.50. It currently trades at 97.20, keeping an insignificant share of the gains.
USD/CHF:This pair made a huge move – from 1.17 to 1.1160 – 640 pips (!). The Swissy retracted during this week, but didn’t lose much. It currently trades at 1.12, almost at the bottom. SNB intervened to weaken the Swiss Franc, but this didn’t last. FOMC moves strengthened the Swissy to levels that were last seen in the beginning of the year.
So, the majors differ majorly from one another: The British Pound and the Swissy “took off” from these decisions, and are in totally different place. They seek continued strength.
The Euro got some gains, but the currency, like the whole EU, is hesitant to go further.
And the Yen – well, it went with the other guys, but later couldn’t resist the strong correlation with the dollar – when the dollar weakens against the Europeans, the Yen weakens even more. This correlation didn’t hold at first, but the Yen quickly returned to its first place.
This stunning FOMC statement was indeed a big event, but in an extremely volatile market, with a huge global crisis, new events overshadow even a trillion dollar printing machine called the Federal Reserve.