The Federal Reserve, in a widely anticipated move, held its benchmark interest rates steady at 4.25% to 4.50% following their latest policy meeting, unleashing a wave of market reactions. The decision, accompanied by a hawkish tone from the Fed's statement, led to an immediate strengthening of the US Dollar. Consequently, the AUD/USD pair extended its decline on Wednesday, hitting a low of 0.6220. This downturn came as traders digested the Fed's stance, which removed previous language that suggested inflation was nearing the 2% target, signaling cautiousness regarding future rate cuts.
The Fed's decision led to an immediate impact on global markets, with gold prices also trading at fresh daily lows below $2,750. This movement reflects the market's reaction to the Fed's unchanged interest rate policy and the perceived dovish outlook. Jerome Powell's upcoming speech is now highly anticipated as investors seek further clarity on the central bank's future actions.
The announcement saw the US Dollar gain ground against most major rivals, placing additional pressure on the Australian Dollar. Market participants noted that the 20-day Simple Moving Average at 0.6230 served as a resistance level for the AUD/USD pair, while key support was identified at 0.6200. A breach below this level could potentially expose the pair to further declines toward 0.6170.
The Federal Reserve's decision was largely expected following its January meeting, maintaining stability in interest rates. However, the shift in tone regarding inflation targets has led to increased caution among investors. The removal of prior language suggesting progress towards the 2% inflation target hints at a more reserved approach to future rate cuts.
The ensuing market mood saw a boost in the US Dollar's value, contrasting with the weakening Australian Dollar. Traders remain attentive to Jerome Powell's upcoming remarks, which may provide further insights into the Fed's perspective on economic conditions and monetary policy direction.