The U.S. dollar fell on Wednesday, erasing an earlier gain after the Federal Reserve was seen as striking a somewhat cautious note on inflation, which is seen as bearish for greenback.
The U.S. central bank said inflation was “running below 2%” instead of “running somewhat below 2%,” as it had in its June statement. The Fed’s preferred inflation gauge, the personal-consumption index, or PCE index, has tapered off to 1.4% growth over 12 months from a five-year high of 2.1%.
The Fed also indicated, as expected, that it would start to wind down its bondholdings “relatively soon” and kept interest rates unchanged, as had been widely expected.
PG View: The dollar index tumbled to fresh 13-month lows after the Fed’s announcement, providing on ongoing tailwind for gold.