US Dollar (USD) Plunges after Fed Decision
The US Dollar (USD) softened yesterday as traders held back ahead of the Federal Reserve interest rate decision. Disappointing US economic data kept USD on the defensive.
Last night, the Fed raised rates by a mere quarter of a percentage point, as expected. Although Fed Chair Jerome Powell tried to quash expectations that the bank would cut rates later in the year, USD exchange rates nosedived.
Today, an expected strong recovery in US factory orders may bolster the ‘Greenback’. However, yesterday’s dovish Fed decision could keep USD subdued.
Pound (GBP) Licks Wounds but Movement Is Muted
The Pound (GBP) edged higher against some of its weaker peers yesterday, though it failed to notably recoup losses following Tuesday’s fall.
Caution ahead of today’s Bank of England (BoE) interest rate decision muted movement in GBP, as did concerns about a wave of strike action by public sector workers.
Turning to today, the BoE meeting is in the spotlight. While markets expect another half-point hike, any signs that the bank will soon pause its tightening cycle could prompt a selloff in Sterling.
Euro (EUR) Shrugs Off Cooler CPI
The Euro (EUR) strengthened on Wednesday, despite a larger-than-expected cooldown in the Eurozone consumer price index.
The upside came as the core inflation rate unexpectedly held steady at 5.2%, rather than easing to 5.1%. This suggests that inflation remains sticky, and it may prompt more hawkish action from the European Central Bank (ECB) today.
If the ECB reiterates its commitment to further rate rises, the common currency could strengthen. Anything less may disappoint EUR investors, thereby dragging EUR lower.
Canadian Dollar (CAD) Retreats as Oil Weakens
The Canadian Dollar (CAD) edged lower yesterday, trimming some of Tuesday’s post-GDP gains. The downside came as falling oil prices pressured the crude-linked currency.
Movements in the oil market could drive CAD exchange rates today, in the absence of any noteworthy Canadian economic data.
Australian Dollar (AUD) Capped amid Tepid Market Mood
The Australian Dollar (AUD) firmed following the Fed decision last night, due to AUD’s negative correlation with USD. However, a subdued market mood in Asian trade capped any further gains for the ‘Aussie’.
New Zealand Dollar (NZD) Firms following Fed Decision
The New Zealand Dollar (NZD), meanwhile, managed to extend its post-Fed gains during overnight trade.