Stocks fall, dollar pares losses after Fed decision

US stocks stocks fall Federal Reserve Bank of America Merrill Lynch New York

US stocks stocks fall Federal Reserve Bank of America Merrill Lynch New York

Prices for US Treasuries rallied, while stocks on Wall Street were little changed.

Against the yen, the dollar was last down 0.35 percent, to 109.70 yen, after falling as much as 1 percent and hitting its lowest level against the Japanese currency since April. "They want to discern a long-term trend and not be overly influenced by a moth or two of data". This as well as underwhelming Eurozone data has led to a weakening Euro this week.

The euro is down by 0.5% at 1.1160 against the dollar.

The Fed said it expects USA inflation to be at 1.7 percent by the end of this year, down from the 1.9 percent previously forecast. While Italy's inflation met expectations, France's inflation stat disappointed.

However, the slippage in longer-dated yields may imply that investors aren't as unfazed by a batch of data, including a recent tepid reading of consumer prices (http://www.marketwatch.com/story/inflation-falls-again-in-may-as-cpi-recedes-from-recent-high-water-mark-2017-06-14) and the Friday's housing data, that have signaled that inflation and perhaps the economy, may not perform as optimally as the central bank hopes. However, the figure came in at an impressive 42k while the previous result was revised higher to 46.2k.

German Chancellor Angela Merkel stated this week that the success of Macron's party could pave the way for stronger European Union integration.

Policy makers in Japan, Switzerland and Britain are also scheduled to weigh decisions this week.

Congress testimonies from ex-FBI director James Comey and Attorney General Jeff Sessions have had no effect on Dollars trade, as they did make things notably better or worse for controversial US President Donald Trump. When Wednesday's US inflation data from May was published, the US Dollar briefly plunged. So far this year, it has risen 16.98%.

The dollar advanced after the Fed raised interest rates for the second time in 2017 and chair Janet Yellen suggested the strength of the U.S. labor market will ultimately prevail over recent weakness in inflation.

Looking ahead to next week, investors may react to the final round of French legislative elections on Monday, as well as the Reserve Bank of Australia's (RBA) latest meeting minutes on Tuesday.

According to the CME FedWatch tool, bets that the Fed will hike rates this week are over 95%.

Meanwhile, the Yale University economics professor explained that a big risk could be a decline in the prices of 10-year Treasury notes.

Risk sentiment was also hit by fear of more USA political turmoil after Washington Post reported that Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice.

However, the Fed did lower its inflation forecast for 2017.

The dollar index, which tracks the greenback against six major peers is higher after upbeat US economic data gave investors reason to hope the US Central Bank will stick with its plan to hike rates.

"This does seem like a more hawkish statement: the Fed announcing an update to their reinvestment principles leaves September open to the start of balance sheet runoff", said Gennadiy Goldberg, interest rate strategist at TD Securities, in NY.

'The FOMC's response is likely to be a "dovish hike" and that's priced in, to a large degree. Fed policy meetings in October and December were seen as alternative options to begin the process.