Dollar plunged while US equities soared after FOMC statement released overnight was seen as relatively dovish by the markets. The dollar index dived to as low as 96.62 as the greenback was sold off across the board. Nonetheless, dollar recovered much ground in Asian session and the dollar index is back above 98 level at the time of writing. Dollar stays bullish against euro and sterling but looks a bit vulnerable against commodity currencies in near term. DJIA closed 227.11 pts, or 1.27% up at 18076.19, back above 18000 handle. S&P 500 rose 25.22 pts, or 1.22%, to close at 2099.5, just shy of 2100. Gold is notably higher above this week's low of 1141.6 and is trading above 1170. Crude oil also got a lift from this week's low of 42.03 and is hovering around 44 for the moment.
The Fed removed the 'patient' language in the March FOMC meeting statement. However, downward revision of the economic assessment has made the overall message more dovish than expected. The Fed noted that economic growth to have 'moderated somewhat', compared with January's 'economic activity has been expanding at a solid pace', with weakening of exports growth as part of the factors causing the moderation. It was also unveiled in the staff economic projection that both GDP growth and core inflation forecasts were revised downward for 2015 and 2016. Note, in the reduction in the long-run unemployment forecast, that the Fed now sees no inflationary pressure on the economy even if the unemployment rate falls to as low as 5%. On the rate hike schedule, the Fed noted explicitly that there would be no rate hike in April. While Chair Janet Yellen stated that she could not 'rule out' a rate hike in June, the tone of the statement and the downgrade of economic projections suggested that the first rate hike would come in September the earliest, rather than June. More in Fed Lost 'Patience', Yet Softer Outlook Suggests Rate Hike Unlikely in April and June.
DXY's sharp decline confirmed short term topping at 100.39. At this point, price actions from 100.39 are treated as consolidation first as long as 95.48 resistance turned support holds. That is, we'd expect some sideway trading below 100.39 in near term, followed by upside breakout to resume the larger up trend. However, there are two points to consider. Firstly, the index looks very overbought in weekly and monthly chart. Secondly, it's close to key long term fibonacci level of 61.8% retracement of 121.02 to 70.69 at 101.79. Thus, a pull back could be due. Decisive break of 95.48 could trigger a much deeper correction.
Elsewhere, New Zealand GDP grew 0.8% qoq in Q4 as expected. SNB policy decision is the main focus in European session today and no change is expected. Swiss will also release trade balance while ECB will release monthly bulletin. US will release current account balance, jobless claims, Philly Fed survey and leading indicators.