The Aussie dollar has traded to a new six-month low and through more than a 100 points since the FOMC statement and Fed chair Janet Yellen’s press conference kicked off at 4am.
It’s been a rollercoaster of price action and sentiment, as first the US dollar strengthened following the Fed’s release of information about the process by which they would normalise rates and the infamous dot chart. Both of which were taken as indicators of a clear intent to tighten in 2015.
But as Janet Yellen sat down and began her statement, traders recognised a dove when they saw one. The USD came under pressure and the Aussie started rallying again – back above the level it had been at before the FOMC statement. That’s more than half a cent from the low.
But the longer she spoke, and as she took questions, it became clear that Yellen was indeed repositioning expectations about Fed policy. The USD was off to the races once more, USDJPY surged above 108.20 and the euro fell to 1.2860 while the Aussie lost around 70 points in under 10 minutes to sit this morning at 0.8955.
It’s been a rollercoaster but it seems the takeaway is that the US dollar continues to strengthen across the board which will pressure the Aussie dollar lower.
Glenn Stevens will be pleased.