Fed leaves interest rates unchanged, US Dollar ditched to four-month low

Fed leaves interest rates unchanged, US Dollar ditched to four-month low

"The Fed's view on the economy hasn't actually changed much, arguing that "the labor market has continued to strengthen and that economic activity has been rising at a solid rate". A survey of forecasters has estimated that the eurozone economy will grow by 1.5 percent this year, its slowest expansion since 2014. The Dow rose by 435 points, or 1.8 percent, and the S&P 500 was up to by 1.6 percent, bringing the increase in both share indexes to around 7 percent for the month, after the worst December since 1931. Apple's results in afterhours trade on Wednesday morning took one risk off the table and showed a set of numbers below that of previous earning's reports, but above that priced in to financial markets.

Powell denounced any idea the Fed was caving to political pressure by taking a more dovish approach.

"This marks a full 180 from what the Fed was signaling just a few months ago", said Mohamed El-Erian, chief economic adviser at Allianz, in Newport Beach, California.

Powell told reporters Wednesday that the Fed does take account of sustained changes in financial conditions when setting policy, because they impact the economy.

Policy makers have made clear they plan to take a wait-and-see approach to watch as the USA economy evolves against such a significant number of challenges, even changing their policy statement this month to reflect those concerns.

U.S. futures gained. Nasdaq futures are up 0.4% after the underlying index on Wednesday closed 2.6% higher.

"They essentially alleviated any sort of fear of an aggressive path to rate hikes by really emphasizing that message of patience and flexibility and largely data dependent", she said in an interview.

Sterling, which is grappling with troubles of its own on uncertainty over the prospect of a chaotic British exit from the European Union, was up 0.1 percent at $1.3127.

Just as the Fed's four rate increases past year were a product of better-than-expected growth nudged higher by some of Trump's policies - a sign of economic strength even if the president called it otherwise - the policy shift this week was a sign the best days of Trumponomics may be over.

Last week, Larry Kudlow, head of the President's National Economic Council, said the administration "wants highly capable, competent people who understand that you can have strong economic growth without higher inflation".

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"There is still a lot to worry about outside the U.S. with growth in Europe and China slowing".

The STOXX 600 ended the day up 0.04 percent but gained 6.1 percent in January, its strongest month since October 2015.

A weaker dollar helped nudge the euro to $1.1501 on Wednesday, its highest since January 11, and the common currency was last up 0.15 percent at $1.1493.

The Japanese yen strengthened 0.21 percent versus the greenback at 108.83 per dollar.

Spot iron ore added 0.4% to the steep gains earlier in the week, to $84.30/tonne, another high since March 2017. Economic data will continue to drive the direction of rates.

"The market is very aggressively discounting any positive outcomes this year" in areas such as domestic growth, trade and the global economy, said Ed Al-Hussainy, a senior interest-rate strategist at Columbia Threadneedle.

Shooting for inflation above -- but not too far above -- target could help cement critical inflation expectations at 2 percent after years in which price rises fell short of that level.

US crude oil futures were up 0.7 percent at 54.59 per barrel. Brent crude oil futures rose 24 cents to settle at $61.89.

The April gold contract was up 30 cents United States at US$1,315.50 an ounce and the March copper contract was up 4.25 cents at US$2.77 a pound.

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