The Aussie is back at 78 cents and the euro is above 1.09 after the Fed this morning dropped any reference to patience while lowering its expectations of economic growth and the need for rate rises this year.
That ignited a rally in currency and stock markets that has seen the US dollar have its biggest one-day fall in around 18 months.
That seems consistent both with the Fed downgrading its growth and interest rate outlook but also with a very specific comment in the first paragraph of the Fed statement which highlighted the FOMC’s disquiet over the US dollar’s recent surge.
In highlighting that “export growth has weakened”, the Fed is both tacitly admitting the strong dollar is hurting but also recognising the malaise in the global economy is something it can neither avoid or deny.
It questions the whole premise that the Fed can aggressively raise rates on its own while the ECB and BoJ continue with QE and rates elsewhere remain at or near zero.
So the Aussie dollar and other currencies are rallying while the US dollar falls.
Here’s the chart.