Fed Says Just Enough to Keep U.S. Dollar Buoyed

The Fed’s monetary policy statement and interest rate decision may have grabbed the headlines on Wednesday, but there was another U.S. report that could’ve shared equal billing. According to ADP, the large payroll processor, U.S. job growth may have bounced back in April.

ADP said on Wednesday that businesses added 204,000 jobs last month, possibly signaling the headline number in the government’s non-farm payrolls report on Friday will reveal a rebound in hiring after a weak showing the prior month.

According to estimates, economists expected the ADP report to show the private sector of the economy added 198,000 jobs. Friday’s U.S. Non-Farm Payrolls report is expected to show that 195,000 jobs were added in the public and private sectors.

“Despite rising trade tensions, more volatile financial markets and poor weather, businesses are adding a robust more than 200,000 jobs per month,” said Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compile the report.

Fed Recap

The U.S. Federal Reserve left its benchmark overnight lending rate in a target range of between 1.50 percent and 1.75 percent.

The Federal Open Market Committee said inflation had “moved close” to its target and downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.

Essentially, its monetary policy statement suggested the Fed is confident that inflation remains on track to meet its target.

U.S. Dollar

The U.S. Dollar closed higher against a basket of currencies on Wednesday, but well off its highs after the Fed released its interest rate and monetary policy decision. The central bank said that inflation had “moved close” to its target and that “on a 12-month basis is expected to run near the FOMC’s symmetric 2 percent objective over the medium term.”

The dollar likely weakened because the language in the Fed statement was largely expected. If the central bank had used stronger language to indicate further rate hikes were coming in 2018, the Greenback probably would’ve finished on its highs.

The Greenback didn’t turn down on the news because it is being supported by the expectation that the Fed will continue to raise rates while other central banks, including the European Central Bank, are seen as taking longer to normalize monetary policy.