XE Morning Update - May 2, 2019

As widely anticipated the Federal Reserve maintained the target range for the federal funds rate at 2.25 to 2.50 for the third consecutive meeting, commenting that there was no strong case to move rates in either direction.

"In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes," the FOMC said in its statement.

Although the Fed acknowledged both headline and core inflation for Q1 came in unexpectedly low, data since the March meeting shows economic activity rising at a solid pace.

The decision not to move rates comes a day after President Donald Trump took to Twitter to urge the Fed to cut rates by 1%, claiming that the economy would go “up like a rocket” if the central bank stopped unwinding its balance sheet in a process called “quantitative tightening.”

The USD which was initially trading lower following the statement turned positive during the post statement press conference after Fed Chair Powell indicated that the Fed are confident that inflation will push up towards their 2% target rate saying, "We suspect that some transitory factors may be at work. Thus, our baseline view remains that with a strong job market and continued growth, inflation will return to 2% over time."

Prior to this morning’s announcement the market had been pricing in 47bps of rate cuts over the next 12 months, this has now been reduced to 33bps of cuts.

Global equity markets remain mixed, - Dow +0.19%, S&P 500 +0.18%, FTSE -0.44%, DAX +0.13%, CAC +0.10%, Nikkei Closed, Shanghai +0.52%.

Gold prices are trading lower, down 1.4% trading at $1,273 an ounce. WTI Crude Oil prices are marginally lower, down 0.2% Trading at $63.76 a barrel.

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