USD: US raises interest rates but without accelerating the timeline for future hikes

Yesterday’s Federal Open Market Committee rate decision has been firmly in traders’ diaries, such was the speculation surrounding a likely interest rate hike. With inflation above the central bank’s target of 2%, and unemployment sitting on its sweet spot of around 4.6%, market expectation was rife that the US central bank would raise rates by 0.25%, whilst signalling that further rate hikes were around the corner.

The Federal Reserve delivered the expected rate hike of 0.25% but fell short in its commitment to further rate hikes. As a result, we saw the US dollar weaken against the majority of its counterparts. The central bank projected that there would be two more increases this year, but this outlook is unchanged from December. Many analysts had been expecting an increase in its long-run rate projections.

Other news out of the US included positive core consumer price index data, retail sales and crude oil inventories, but this data couldn’t give the US dollar a leg up under such circumstances.