**AUD/USD Plunges as the Federal Reserve Holds Rates Steady, Market Focus on Powell’s Statements**
*Original reporting credit: Anil Panchal, FXStreet*
The AUD/USD currency pair experienced a sharp drop as the Federal Reserve maintained its benchmark interest rates at their current levels and signaled a cautious stance about the timing of future policy changes. As investors searched for clarity on U.S. monetary policy moving forward, all eyes shifted to the press conference by Federal Reserve Chair Jerome Powell. Traders and analysts alike were eagerly looking for any subtle hints regarding when rate cuts may occur in the world’s largest economy.
### Overview of Recent AUD/USD Movements
– The AUD/USD dropped below significant support levels following the Fed’s decision.
– Prior optimism for the pair, driven by risk sentiment and stable Australian economic releases, quickly faded.
– Renewed demand for the U.S. dollar pushed the Australian dollar lower, resulting in multi-day lows for the pair.
### Context: The Federal Reserve’s Decision
On Wednesday, the U.S. Federal Reserve announced it would keep the federal funds rate steady in a range of 5.25 percent to 5.50 percent, as widely anticipated by global markets. Despite ongoing inflation concerns, the central bank maintained a cautious stance, restraining market hopes for an imminent easing policy.
– The Federal Open Market Committee (FOMC) stressed ongoing uncertainty about the inflation trajectory.
– The Fed’s statement reflected the economy’s resilience but also ongoing inflation risks.
– The U.S. central bank explicitly avoided providing a timeline for potential rate reductions.
### Key Highlights from the Fed Meeting:
– Policy rates remain at a two-decade high, reflecting persistent inflation pressures.
– Economic data shows robust labor market trends, lower unemployment, and steady consumer spending.
– The FOMC reasserted its commitment to eventually achieving two-percent inflation.
– No new suggestions were offered regarding the “neutral rate” or the timing of future policy moves.
### Jerome Powell’s Press Conference: What Markets Watched
Jerome Powell’s press conference after the FOMC statement carried high importance for the foreign exchange and broader financial markets. While Powell reaffirmed the Fed’s data-dependent approach, his careful language led to increased volatility in dollar pairs, specifically AUD/USD.
Main points from Powell’s commentary:
– He reiterated that inflation remains above target and justified keeping rates on hold.
– Powell emphasized that the Fed is not considering rate hikes but is also not close to declaring victory on inflation.
– He acknowledged recent improvements in inflation readings but cautioned that “greater confidence” is needed to start a rate cut cycle.
– Powell’s mixed signals left traders hesitant to commit to directional trades on AUD/USD.
### Immediate Market Reaction
Immediately following the Fed announcement and Powell’s press briefing, the Australian dollar fell against its U.S. counterpart. The dollar index (DXY) soared to fresh session highs, reflecting increased risk aversion.
– The AUD/USD pair slid sharply, dipping below previous
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