Home 4 reasons why the dollar is down on the Fed

4 reasons why the dollar is down on the Fed

The Fed said its word: removed patience, but also said a lot of other things.

The USD is selling off heavily after a  statement that saw the removal of forward guidance: the move that paves a rate hike.  Why? Here are 4 quick reasons:

  1. Confidence needed on inflation: Beforehand they seemed more confident. Yellen still sees oil prices as transitory and reaching core inflation, but this confidence goes hand in hand with the previous wording on “patience”.
  2. Explicit mention of no hike in April: The Fed usually  does not limit itself, and this time it does that. One can look at that as opening the door to a hike in June, but this is not the case, and the Fed could  also repeat that in the next statement.
  3. Economy has moderated: this is a bearish turn after bullish views on the labor market. Retail sales, industrial output, durable goods orders and  consumer confidence are falling.
  4. Median FFR has been moved down: from 1.125% in December to 0.625 now. This may the most important factor. A difference of 50 basis points is two rate hikes and could be the difference between a hike in June and in September.

Yellen did manage to balance a small part of the bearishness, but just a bit.After the  some consolidation as she began speaking, the dollar resumes its falls.


In our latest podcast, we discuss QE: Who got it right, Krugman or the Gold bugs?

Subscribe to our iTunes page

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.