The dollar index (DXY00) on Wednesday fell by -0.90% and posted a 6-week low.  Strength in the British pound undercut the dollar after an unexpected increase in the UK Feb CPI pushed GBP/USD to a 6-week high.  Also, hawkish comments Wednesday from ECB President Lagarde pushed EUR/USD up to a 5-week high and weighed on the dollar.

The dollar fell to its low Wednesday afternoon when the Fed did not raise its dot plot projection and kept its peak fed funds rate estimate of 5.1% for end-2023, unchanged from December, signaling only one more 25 bp rate hike this year.

The FOMC voted unanimously to raise the federal funds target range by 25 bp to 4.75-5.00% and said "some additional policy firming may be appropriate."  The Fed said it would continue with the same pace of quantitative tightening, leaving in place monthly caps of $60 billion for Treasuries that are allowed to mature without being reinvested and $35 billion for mortgage-backed securities.

The FOMC's dot plot of interest rate forecasts shows a peak fed funds rate of 5.1% for end-2023, unchanged from a December projection, and the end-2024 peak fed funds rate projection was raised to 4.3% from 4.1% in Dec. 

The FOMC cut its U.S. 2023 GDP forecast to 0.4% from 0.5% in Dec and raised its 2023 core PCE forecast to 3.6% from 3.5% in Dec.

The Fed said the U.S. banking system is "sound and resilient," but the financial turmoil is "likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation" to an uncertain extent.

Fed Chair Powell said there is no inflation progress yet on non-housing service prices, and Fed officials "just don't" see any Fed interest rate cuts this year.

EUR/USD (^EURUSD) on Wednesday rose by +1.01% and posted a 6-week high.  Wednesday ‘s slump in the dollar supported the euro.  Also, hawkish comments by ECB President Lagarde Wednesday gave EUR/USD a boost when she said the ECB would take a "robust" approach to inflation risks.

Specifically, ECB President Lagarde said, "we do not see clear evidence that underlying inflation is trending downwards," and the ECB will take a "robust" approach that allows it to respond to inflation risks as needed but also aid financial markets if threats emerge.

USD/JPY (^USDJPY) on Wednesday fell by -0.85%.  A weaker dollar Wednesday sparked short covering in the yen.  Also, lower T-note yields Wednesday were supportive of the yen.  In addition, a sharp reversal in stocks Wednesday afternoon sparked some safe-haven demand for the yen. 

April gold (GCJ3) on Wednesday closed up +8.50 (+0.44%), and May silver (SIK23) closed up +0.361 (+1.61%).  Precious metals Wednesday posted moderate gains, with silver climbing to a 6-week high. The sell-off in the dollar Wednesday to a 6-week low was bullish for metals.  Also, lower T-note yields Wednesday were supportive for metals.  In addition, the recent banking turmoil has sparked fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 1-month high Tuesday.  Gold prices rallied more than $20 an ounce above their Wednesday afternoon closing level when the Fed maintained its dot plot forecast and kept its peak fed funds rate estimate for 2023 at 5.1%, unchanged from December and a dovish development. 

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