Breakdown of the latest developments on the global exchanges
Mar 18, 2021, 6:46 AM GMT

FED Stays on Course, Still Seeks Inflation 'Moderately Above' 2.0 per cent

FED Chair Jerome Powell speaking on a virtual press conference on March 17, 2021

At the highly anticipated March meeting of the FED, the Federal Open Market Committee remained determinately dovish in its remarks. This was the key aspect of yesterday's meeting, given that some investors were concerned that the Committee would revise its stance on inflation.

The Federal Funds Rate was kept unchanged at 0.25 per cent, as was anticipated by the preliminary market forecasts. It was additionally decided that the Federal Reserve will continue purchasing Treasury securities at the same underlying pace (at least $80 billion per month), which will likely calm the stock market even further.

Jerome Powell and his colleagues reviewed the most recent developments in the labour market, as well as the latest price trends. The persisting need for maintaining an accommodative policy stance was then stressed upon, in order to achieve FED's longer-term goals:

"[…] the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved."

The FOMC did not express any concerns regarding the possibility of headline inflation getting out of hand and spiralling towards hyperinflation. Thereby, the recent uptick of 0.3 per cent in consumer prices is seen more of a step in the right direction, as opposed to an early signal for necessary policy tightening.

US inflation laggs behind FED's longer-term goals of inflation rising moderately above 2.0 per cent

The overall dovish undertones of the Committee's decision boosted demand for lower-risk securities, such as gold, in the several hours following the meeting's conclusion. Meanwhile, the dollar retreated.

As can be seen on the 2H chart below, the EURUSD jumped by 0.64 per cent in the first two hours after the decision was published, setting up a strong start to a potential hike in the near future.

This can be inferred from the fact that the preceding Triangle pattern is now followed by a breakout Marabozu candlestick. However, market bulls should keep in mind that the price action is currently consolidating below the psychologically significant resistance level at 1.20000, which can act as a prominent turning point.

The EURUSD broke out above the Triangle pattern in a major bullish upswing, following FED's March meeting