Fed policy update refrains from derailing bearish USD trend – MUFG

FXStreet reports that according to economists at MUFG Bank, the US dollar is vulnerable to further weakness in the near-term.

“The Fed maintained their very dovish policy stance despite acknowledging the robust US economic recovery at the start of this year. The lack of any hawkish policy shift last night from the Fed has encouraged an extension of the bearish US dollar trend that has been in place this month.”

“The bullish update to their outlook for the US economy did not prompt the Fed to alter their dovish policy guidance. Chair Powell reiterated that the Fed is still far away from withdrawing support for the US economy, and was not yet thinking about thinking about tapering QE.”

“The developments support our view that it is likely too early to expect the Fed to alter their policy stance in light of their new policy goals. When evidence continues to build over a robust recovery in the first half of this year, the Fed will be in a better position to prepare markets for tapering QE heading into the summer. It leaves the US dollar vulnerable to further weakness in the near-term.”