Dollar falls as Fed keeps dovishness on autopilot

Fed – Removes 2019 hikes, leaves one for 2020 and to halt QT in Sept

Brexit – MV expected Tuesday or Wednesday

Trade War – Trump notes EU as tough on US as China

Oil – Stockpiles fell 9.6M even as imports rose 186K

Gold – Stronger on dovish Fed


The Fed kept its benchmark interest rate steady on Wednesday and signaled that the doves are here to stay.  The FOMC updated their dot plot forecasts with a bigger cut than what was expected for this year.  The forecast for 2019 went from two hikes to none and they now are pricing in one hike in 2020.  The Fed also lowered economic growth forecasts for both 2019 and 2020, a sign that slower growth abroad and the never-ending trade war (China and eventually Europe) is weighing on the outlook to the domestic economy.

We did see a slight hawkish surprise on the announcement that the Fed will end their balance sheet runoff at the end of September.  The end of Quantitative Tightening (QT) was well telegraphed by Fed speakers over the past couple of months, but the expectation was for the Fed to end it either at this meeting or the June 19th one.

The Fed did not need to overcommit the dot plot forecast reduction and, in a few months, we could be saying this was a policy mistake.  Many of the headwinds that the Fed is concerned about could become tailwinds and the pre-emptive removal of all hikes for this year could derail the Fed bringing rates to normal before the next recession.

The dollar fell against most of its major trading partners following the Fed rate decision and Powell press conference.  Yields across the Treasury curve all fell sharply with the spread between the 10-year and 2-year Treasuries narrowing to 12.6 basis points.


To the surprise of no one, Brexit is going down to the wire and we should see a meaningful vote on PM May’s Brexit deal on Tuesday or Wednesday.  PM May latest chess move was requesting a three-month extension to the Brexit deadline to give her time to try to push her deal through Parliament.  A final decision from the EU may not occur at the end of the March 21-22nd summit and another one may need to occur on March 28th.  Hard Brexit risks have gone up and the British pound has sold off.

Tomorrow, the Bank of England (BOE) will keep rates steady and markets will look to see if they become a little more optimistic as the data has been relatively good and expectations grow for Brexit to see short delay.  Current expectations are for the BOE to raise rates in 2020, but that could move up if we see inflation move back into the Bank’s target.

PM May also delivered a late speech that was mainly a pitch to get Tory and DUP support.  She reiterated that the choices are her deal, no deal or not leaving the EU at all.

Trade War

Standard rhetoric from President Trump provided both negative and supportive headlines on the trade front.  The President first said that the China trade deal is coming along.  US stocks extended declines following Trump’s comment that We are talking about leaving them for a substantial period of time until China complies with the deal.  Trump also reminded traders that once we have a deal done with China, that the EU is just as tough.

Markets are still pricing in a trade deal within the next couple months and the next big update should come from Trade Rep Lighthizer and Treasury Sec Mnuchin trip to Beijing next week.  If they are unable to make enough progress to warrant a Trump/Xi meeting, markets could grow nervous and safe-havens could come into demand.


Crude prices jumped higher after the weekly crude inventory data showed a sharp drop despite a rise with imports.  The biggest draw since last summer saw inventories fall 9.6 million barrels, markets expected a rise of 604,000 barrels.  West Texas Intermediate crude recaptured the $60.00 a barrel level, the first time since November.

Oil markets appear convinced that the continued effects of the Saudi Arabia oil production cuts and falling exports to the US will continue to outweigh the concerns of rising US production. Global growth concerns could receive a couple of doses of good news if we see a trade deal finalized in the coming months.


The precious metal rose for a fourth consecutive and recaptured the 50-day SMA after the Federal Reserve signaled rates were not going higher this year.  The very dovish Fed meeting could provide a positive backdrop for commodities.  The softer dollar combined with softer economic outlooks that are driving the movement of accommodative stances globally could help propel metals in the short-term.  In recent weeks, a trade deal between China and US has been the biggest bearish driver for gold prices.  As talks enter the final stage, risk remain that President Trump could walk away from a deal if he is not satisfied with all of China’s concessions.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023.

His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.