Kantox currency update: Fed’s Powell puts a halt to dollar surge
The US dollar dove against the major currencies on Wednesday after the Fed chairman, Jerome Powell, affirmed that US interest rates are approaching the neutral level, which means that the bank’s three-year tightening cycle might be coming to an end.
The market has been taken by surprise and reacted with generalized dollar sales, which favoured the euro and the pound and a strong stock markets rally.
EUR/USD bounces at 1.1270 and returns to 1.1400. The euro found support at 1.1270 and bounced up strongly after Fed Powell’s comments, to retrace the previous three days’ losses and return to 1.1400 area. As at London market opening times, the EUR/USD is trading at 1.1385.
GBP/USD: picks up above 1.2800. The sterling bounced up at 1.2725 to pare previous losses although upside attempts remain weighed on concerns that the UK parliament might disapprove the Brexit agreement and trigger an unorderly withdrawal from the EU. As at London market opening times, the GBP/USD is trading at 1.2790.
USD/JPY rally, capped at 1.1400. The dollar rally from last week’s lows at 112.30 was capped on Wednesday at 114.00, and the pair pulled back after Powell’s comments, to reach session lows at 113.20 on Thursday’s early trading. As at London market opening times, the USD/JPY is trading at 113.35.
In the Calendar Today
Today, in the US, the Department of Commerce will release the Personal income and spending data. These are two relevant gauges of consumption and the employment situation and tend to have a moderate impact on the dollar.
The most relevant event, however, will be the release of the FOMC minutes. Powell hinted yesterday to the end of the bank’s monetary policy tightening cycle and the investors will be eager to know how will this affect the bank’s rate hike calendar for 2019. Any hints to a pause on the tightening cycle might increase negative pressure on the US dollar.
13:30 GMT US: Personal Income (Oct)
Previous: 0.2% Expected: 0.4%
13:30 GMT US: Personal Spending (Oct)
Previous: 0.4% Expected: 0.4%
19:00 GMT Fed minutes