Dollar up after recent declines as market expectations adjust to possible new Fed rate path
June 4, 2019
Trade concerns and weakening economies around the world caused financial markets to reassess the Federal Reserve’s possible rate moves and now expect two Fed rate cuts in 2019. The US dollar gained this morning after having sold off on rate cut possibilities. Fed Chairman Powell speaks later this morning and Non-Farm Payroll numbers on Friday will be the market focus.
“Nothing great was ever achieved without enthusiasm”
June 4, 2019
EUR/USD 1.1233 GBP/USD 1.2680 USD/CAD 1.3423 AUD/USD 0.6974 USD/JPY 108.17 USD/CNH 6.9275 USD/ILS 3.6150 USD/MXN 19.6618 USD/CHF 0.9942 USD/INR 69.234
The dollar is stronger this morning as markets await Fed Chairman Jerome Powell comments at the Chicago Fed conference today at 10am Eastern.
Yesterday markets started to position for an interest rate cut from the Federal Reserve as early as the July meeting. The view was compounded after the Fed’s Bullard said “a downward policy rate adjustment may be warranted soon” and that global trade tension “is adding impetus to a case for a rate cut”. Market futures pricing currently point to two .25% cuts in 2019.GBP
The pound is up for a third day vs. the US dollar despite disappointing manufacturing data in the UK released yesterday. Brexit related news centered around speculation on the next Prime Minister as Theresa May plans her resignation later this week.
Donald Trump, who is currently on a UK state visit, said a trade deal was possible once the UK “gets rid of the shackles” of the EU. A possible press conference later this morning will keep traders on high alert for additional trade threats/promises.EUR
The euro weakened after two days of gains vs. the US dollar. Inflation for the month of May in the eurozone region fell further below the ECB target of 2.0% to 1.2%. The expected reading for CPI had been 1.3% YoY and compares to last month at 1.7%.
In Italy, Prime Minister Giuseppe Conte threatened to resign if coalition partners in the government don’t stop arguing.CAD
The Canadian dollar is flat as the price of oil seems poised to fall further after having lost 16% since May 21.ASIA/PACIFIC
The Reserve Bank of Australia (RBA) cut interest rates further, in-line with market expectations. The base rate now stands at a record low of 1.25%. Oddly, the A-dollar initially strengthened after the rate cut, but then RBA Governor Lowe suggested more rate cuts are possible, driving high volatility in the AUD/USD rate.
The Indian rupee’s strengthening trend is headed toward the 68.5 low in May. Economists like the stability the recently re-elected Prime Minister Modi brings to the Indian economy.
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