- EUR/JPY is currently trading at 121.88 during the presser.
- Correlated to stocks, the cross is lower with the S&P 500 dropping back into negative territory.
EUR/JPY is currently trading at 121.88 and is volatile within a 45 pip range around the press conference where the Federal Reserve Chairman has noted plenty of hard times ahead for the population of the US.
EUR/JPY has travelled between a range on the day of between 121.58 and 122.36. The cross is closely correlated to stocks and with the S&P 500 dropping back into negative territory, the cross has followed suit.
The Fed has left rates on hold, which was as expected. Markets were looking for more concrete guidance on the pace of Treasury buying, and there has not been much in the way of that, although remains dovish nonetheless.
It is unclear as to why the stock market has now dropped, although technically it is overcooked and Powell has stated a number of bearish outlooks for the US economy.
The Fed is committed to using tools as long as it takes and notes that it is self-evident that a second wave of the virus could hurt the economic recovery
Ahead of the meeting, the prior statement, in this regard, was as follows:
To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.
In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.
Today’s statement is as follows:
To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.
In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate.
This is a dovish statement that should weigh on the USD for time to come. This would leave the yen to run higher in term of its safe-haven status over the dollar but the stock market is not particularly enthused. This is taking the cross lower and yen higher.
The DXY is down 0.4% at the time of writing and has lost the 96 handle on the statement but regains the 96 handle.
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