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US dollar tumbles as Fed remains dovish following latest rate cut

currency-newsUS dollar tumbles as Fed remains dovish following latest rate cut
The US dollar moved sharply lower yesterday in response the Federal Reserve’s latest rate decision.

Turning to Sterling this morning, the UK currency appears to be finding some support, with GBP/EUR buoyed at €1.1594, GBP/USD strengthening to $1.2941, and GBP/CAD ticking up to C$1.7031. Both GBP/AUD and GBP/NZD are holding steady at AU$1.8717 and NZ$2.0160 respectively.

Looking ahead, the publication of the Eurozone’s GDP figures are likely to command the attention of investors today, with another slowdown in economic growth poised to weaken the euro.

What’s been happening?

The US dollar faced broad losses on Wednesday after the Federal Reserve delivered its third consecutive rate cut.

With the rate cut already widely priced in ahead of time, it was the bank’s forward guidance which proved to be the main catalyst of movement.

While the bank signalled it was done with easing for now, Fed Chairman Jerome Powell also sounded less hawkish than markets had expected, prompting the USD sell-off.

Ahead of the Fed decision, USD exchange rates were also influenced by the latest US GDP estimate. While third quarter growth expanded at a faster pace than expected, concerns over underlying weakness prevented the US dollar from securing any support.

There was also plenty of data for EUR investors to pore over yesterday, but some mixed results meant this failed to translate into any notable movement in the euro.

Meanwhile, the pound remained mostly range bound through Wednesday’s session.

UK politics remained a clear focus for markets as the UK gears up for an election, but with the outcome far from certain GBP investors seem content to hold their positions for now.

What’s coming up?

In the spotlight today we have the preliminary release of the Eurozone’s third quarter GDP figures.

Eurozone economic data has proved underwhelming in recent months, and the euro is poised to tumble if today’s figures show growth slowed to just 0.1% in Q3.

For USD investors the focus will be on the latest PCE price index, with the US dollar set to come under pressure if the Fed’s preferred measure of inflation disappoints.

In the absence of any economic data, UK politics will continue to dictate movement in the pound today, with election uncertainty likely to limit the upside in GBP exchange rates.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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