USD / CAD fell to fresh three-day lows despite aggressive Fed

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  • The Fed keeps interest rates unchanged.
  • The moderation in the asset purchase program “could soon be justified.”
  • The USD / CAD is hovering around a 40 pip range.

The USD / CAD it is falling to three-day lows, below 1.2700 following the Federal Reserve’s interest rate decision that was just released. First, the pair rose to 1.2760, then fell to around 1.2694 and is currently at 1.2767 below 0.64%, at the time of writing.

Highlights of the Summary of Economic Projections

17 Fed members are contemplating a rate hike by the end of 2023 (up from 13 in June projections).

The Fed’s median projection of the fed funds rate at the end of 2022 has risen to 0.3% from 0.1%. This projection rises to 1% by the end of 2023 compared to 0.6% projected in June. By the end of 2024, this average projection amounts to 1.8%.

The Fed forecasts US GDP growth of 5.9% in 2021 (up from 7% previously), 3.8% in 2022, 2.5% in 2023 and 2.0% in 2024.

The entity forecasts an unemployment rate for the United States of 4.8% in 2021 (previous 4.5%), 3.8% in 2022, 3.5% in 2023 and 3.5% in 2024.

The Fed expects PCE inflation to be 4.2% in 2021 (3.4% previously), 2.2% in 2022 and 2023, and 2.1% in 2024.

The entity points to a core PCE inflation of 3.7% in 2021 (previous 3.0%), 2.3% in 2022, 2.2% in 2023 and 2.1% in 2024.

Fed policymakers forecast inflation above the 2% target through the end of 2024.

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