USD Rallies following FOMC...

Source: Forexnews.com

The dollar rallied sharply following the FOMC’s monetary policy announcement, surging from 1.3280 against the euro to just above the 1.31-figure and jumping to 90.75 versus the yen.

The Fed left monetary policy unchanged at its current range of 0%-0.25%, saying that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time”. The FOMC delivered a somber assessment of the economy; attributing the weakness to steep declines in industrial production, housing, and employment; thus prompting a retrenchment of spending by consumers and businesses. Although the Fed anticipates a rebound in the economy later in the year, it deems the downside risks as significant. Further, given the limited scope the Fed has to shift interest rates lower, it reiterated its stance to expand the quantity of agency debt and mortgaged-backed securities purchases to support the mortgage and housing markets. The FOMC also anticipates inflation pressures to remain subdued over the coming quarters.

US economic data will be the focus for the Thursday session, with the calendar consisting of weekly jobless claims, durable goods orders and new home sales. Weekly jobless claims are seen falling slightly to 580k from a week earlier at 589k, while December durable goods orders are estimated to post a 2.0% decline versus a 1.5% drop in the previous month. New home sales in December are forecasted to ease to 400k units, compared with 407k units a month earlier.