The US dollar rebounded after making heavy losses on Wednesday following a dovish Federal Reserve that signaled an interest rate hike could come later rather than sooner. The dollar sold-off after a lowering of the projected Fed Funds rate. The projection for 2015 was cut to 0.625% compared to 1.125% in December’s estimate.
The dollar bounced off the post-FOMC low of 119.27 yen to peak at 120.97 today. The greenback’s rally paused after US initial jobless claims rose slightly by 1,000 to a seasonally adjusted 291,000 versus 292,000 estimated. There was also an unexpected decline in the Philly Fed manufacturing index.
The euro fully retraced its post-Fed bounce to 1.1041 to fall back to 1.0630 where it hovered for the rest of the European session. With the Fed meeting out of the way, the focus has reverted back to the risk of Greece. An EU leader’s summit is taking place today so investors will be keeping an eye on any news coming out from there. Also weighing on the single currency was news that the 400 million euros of ELA (emergency liquidity) to Greece was short of the 900 million euros requested.
Sterling also reversed Wednesday’s rally to 1.5163 to fall back to 1.4739. There were no UK data releases today and the focus turns to the looming UK elections in May.
The Swiss National Bank announced its rate decision. The 3-month LIBOR target rate (for CHF sight deposits with the SNB) was left unchanged at a record-low minus 0.75%. While this was in line with expectations, the statement released showed concern that the Swiss franc was still overvalued and that the SNB will “remain active in the foreign exchange market”. The Swiss Franc became volatile immediately after the news but more-or-less traded back to recent levels. USDCHF fell to 0.9881 from 0.9982 before settling at 0.9910. EURCHF was trading at 1.0550 from around 1.0619 ahead of the announcement.