The US Federal Reserve left its base rate unchanged last night amid expectations that it will rise next month.
The Fed lifted its benchmark rate three times previous year - while also beginning to slowly trim its balance sheet. Investors overwhelmingly expect a rate hike at the Fed's June 12-13 policy meeting.
In a unanimous decision taken at its two-day monetary policy review meeting here that ended on Wednesday, the US Federal Open Market Committee (FOMC) maintained status quo on the federal funds rate at the range of 1.5 per cent to 1.75 per cent, as was widely expected.
Wednesday's Fed statement did not mention trade, simply noting, as it had done in March, that the risks to the economic outlook "appear roughly balanced". Depending on the results of the report, precious metals may lose Thursday's gains as they did following the last jobs report in March. They also referred to the growth outlook as still moderate - same language they used in March.
Investors are now hopeful that a rate hike could occur as soon as June, although this will be dependent on economic indicators remaining positive.
The Fed, under the leadership of new chair Jerome Powell, faces a tricky path ahead as the central bank wants to encourage growth but not trigger a recession. However, the key question is about the number of rate hikes.
"Yesterday's FOMC meeting didn't spark much fireworks, but it eased concerns over whether the Fed was going to stick to its gradual tightening policy, which I believe they are", said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. As the dollar is now in overbought territory, we expect the currency to continue giving up some of its recent gains.
Inflation had remained stubbornly low during 2017, due largely to temporary factors like low mobile phone plan prices, which baffled officials who expected the very strong pace of hiring would pressure wages and push prices higher.
The latest batch of earnings news is also likely to attract attention, with Avis Budget (CAR), Fitbit (FIT), Kraft Heinz (KHC), MetLife (MET), Tesla (TSLA) and Sprint (S) among the companies releasing their quarterly results after the close today's trading. The dollar index slipped 0.1 per cent.
But a string of ominously weak data is causing speculation that the European Central Bank may have to delay closing its bond buying programme from September.
The US economic growth cooled in the first quarter to an annualised pace of 2.3 per cent after averaging higher than 3 per cent in the previous three quarters.
The Fed statement was not quite as hawkish as some had wagered on and caused a dip in the dollar, though sentiment remained bullish given USA rates were still clearly heading higher while those in Europe and Japan lagged far behind.