Federal Reserve confirms incoming tightening

Source: Dukascopy Bank SA
On January 26, the US Federal Reserve Federal Open Markets Committee issued a monetary policy statement. In general, the bank announced that it would finish monthly bond-buying taper in early March, it would soon be appropriate to raise the Federal Funds Rate and US economy is improving, but the pandemic is still having an impact.

Quoting the statement: "Indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months but are being affected by the recent sharp rise in COVID-19 cases.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate. The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage backed securities by at least $10 billion per month."

Released Document

Federal Reserve issues FOMC statement

On the release, the EUR/USD spiked 25 base points, before returning to the previous levels.

On a larger scale, the pair has declined to the 1.2500 mark since a peak in mid-December

Initial Reaction

Larger scale situation

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Actual Topics

Thu, 27 Jan 2022 13:43:44 GMT

US GDP beats forecast

On Thursday, the United States Advance quarterly GDP was revealed to be at 6.9% instead of the market consensus forecast of 5.3%.The event fuelled the already ongoing surge of the US Dollar against other currencies. The EUR/USD reacted with a 22 base point or 22 base point decline in only ten minutes.

Wed, 26 Jan 2022 15:28:58 GMT

Bank of Canada beats down CAD

On January 26, the Bank of Canada made a Rate Statement. In general, the bank kept its Overnight Rate at 0.25% and is set to keep its investments in government bonds constant. However, the markets could have reacted to the news that the bank would remove its exceptional forward guidance on its policy interest rate. Quoting the statement:

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