British Pound surges against the Dollar; Pressured Dollar after FOMC disappointment

On Wednesday, the Sterling jumped 1.1% against the US Dollar, pulling away from a two-month low of $1.2110 after surging 1.2% overnight as Dutch center-right prime Minister Mark Rutte scored a resounding victory over anti-Islam and anti-EU Geert Wilders in an election a day earlier. The BoE is forecasted to keep the interest rate and QE amounts unchanged.

Meanwhile, the Dollar weakened against its major peers after the Federal Reserve raised the target overnight interest rates by 25bps to 0.75-1.00%, as expected, but sounded less hawkish than many anticipated on the pace of further interest rate increases this year. The disappointment came from no upward revision in the projected rate path, as Yellen said that the Fed was willing to tolerate inflation temporarily overshooting its 2% goal and that it intended to keep its policy accommodative for “some time.” Further rate increases would only be “gradual,”, with officials sticking to their outlook for two more rate hikes this year and three more in 2018.

As for the Asian markets, Bank of Japan (BoJ) stood pat on monetary policy by maintaining the 0.1% interest it charges on a portion of excess reserves that financial institutions park at the central bank, and kept the 10-year Government Bond Yield target of around 0%. BoJ maintained a cautiously optimistic view on the economy, and signaled that no expansion of monetary stimulus was forthcoming in the near future.