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By Thursday morning, the U.S. dollar had stabilised its Wednesday evening sell off, caused by the FOMC interest rate hold announcement and the dovish monetary policy statement, broadcast by Jerome Powell after the announcement. Mr. Powell hinted that the “normalisation” process; to take the key interest rate up to circa 3.5% by the end of 2019, was no longer a target and that 2021 could be the likely time when the key rate would rise from 2.5%. He also stated that the Fed would stop its quantitative tightening efforts and no longer attempt to reduce its circa $4.3 trillion balance sheet.

Mr. Powell’s reasons for the volte-face included his belief that the USA economy was facing many threats on the horizon, however, these apparent threats were not mentioned in Q4 2018, or in January 2019. GDP, employment and inflation data is within a six month narrow range, whilst USA equity values have recovered the shock sell off, experienced in Q4 2018.

The surprise FOMC narrative and dovish forward...

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