The US dollar strengthened during the first part of yesterday, although not off its own back, but from a lacklustre Budget announcement from George Osborne and further concerns over the European debt crisis, with Greece’s requirement for further bailout funds weighing heavy on the respective currencies.
This all changed following the statement from the US Federal Open Market Committee (FOMC). US Federal Reserve Chair Janet Yellen announced that the central bank would not be increasing interest rates and the word “patient” was removed from the statement, both of which were as expected, but they did highlight that they needed to see further recovery in the US labour market and that inflation would return to its target of 2%. This increased the level of doubt over whether or not interest rates would be increased in June which saw a sudden “collapse” in the US dollar against most currencies as this expectation had been the driver of its recent strengthen.
Today will be very much driven by market reaction to the Federal Reserve meeting statement and when markets now forecast a date from which interest rates will be increased.