EURUSD plummeted after the Fed’s comments.
The major currency pair plunged yesterday but had enough time to regain its positions. The current quote for the instrument is 1.1723.
So, the September meeting of the US Federal Reserve System “pushed the envelope” after all. Perhaps it was the most “colourful” and insightful session in months. The benchmark interest rate remained intact at 0-0.25% but no one really expected it to be revised.
However, there were changes in the Fed’s comments. The regulator announced that the country’s economy might require the QE program to be reduced in the nearest future. The stimulus might be over by mid-2022. This, in its turn, will allow to raise interest rates.
The fact that the Fed announced the time of the QE completion with some degree of certainty is very important. It means that the regulator confirms it likes the economic recovery speed and sees the prospects quite clearly.
In addition to that, the regulator said that the demand for manpower in the economy remained high and strong and may grow even more as the pandemic was dying down. At the same time, the economic recovery may unravel some problems shipment problems, which can be already seen.
Long-term inflation expectations, according to the Fed, are stable. If necessary, the regulator is ready to contain inflation. The sooner inflation reaches stability at its target levels, the closer the time the regulator closes the QE program.
The Fed is believed to announce the first reduction as early as November. The second reduction is expected to be in March 2022 and the last one in June. This is what gave the “greenback” a huge boost.
