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The US Dollar remains soft after the Fed left rates unchanged and revised its inflation assessment. US GDP growth slowed to 2.3% in Q4, missing forecasts of 2.6% and down from 3.1% in Q3. The Fed removed prior language on inflation progress, stating it remains “somewhat elevated.” Powell’s mixed messaging led to uncertainty, initially pushing the DXY higher before erasing gains. The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, hovers below 108.00 as traders react to the Federal Reserve’s (Fed) latest decision and a weaker-than-expected US Gross Domestic Product (GDP) print. The Fed maintained its policy stance but removed previous references to inflation making progress toward the 2% goal, sparking hawkish speculation. However, Powell later downplayed this shift, calling it a “language cleanup,” which softened the initial market reaction. Meanwhile, GDP growth missed expectations, while inflation components within the report suggested underlying price pressures persist. Daily digest market movers: US Dollar struggles as GDP miss fuels uncertainty The Federal Reserve held interest rates steady at 4.25%-4.50% as widely expected but removed prior language stating that inflation was making progress toward the 2% target. This adjustment was initially seen as hawkish before Powell downplayed its significance. During the press conference, Powell clarified that the inflation language change was merely a “language cleanup” and not an intentional policy shift. His comments softened the market’s hawkish reaction and led to a pullback in the US Dollar. Powell emphasized that the policy stance remains restrictive and that rate decisions will be data-dependent. He refrained from signaling any urgency to cut rates, reinforcing the Fed’s cautious approach. The United States Q4 GDP growth slowed to 2.3%, missing the 2.6% forecast and falling from 3.1% in Q3. This lower-than-expected reading raised concerns about slowing economic momentum.…

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Filed under: News - @ January 30, 2025 9:26 pm