The Federal Reserve hiked rates by 25 bps, as expected by the market. However, the statement was more hawkish than anticipated, which led to an extension of the Dollar rally. The dot plot of the FOMC now projects three rate hikes in 2017 vs. two previously. The Fed also acknowledged the rise in inflation and higher pace of growth.
The Dollar soared against all major currencies post-FOMC. USD/JPY rallied to a high of 117.85, up more than 300 pips, while EUR/USD tumbled from 1.0660 to a low of 1.0470 so far. EUR/USD is likely to test the 2015 low of 1.0450 soon, while USD/JPY has now no significant resistance until 120.
Commodity currencies have also come under pressure, although less than the other majors. AUD/USD only fell to 0.7383 (from 0.75 pre-FOMC), and ND/USD declined to 0.7075.
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