US dollar hits two-year high
August 1, 2019
The Bloomberg Dollar Index advances gains for its 10th consecutive trading session. Yesterday’s FOMC guidance clearly distinguished its rate cut as not the start of a new monetary easing cycle. BoE officials hold rates and asset purchases at today’s policy meeting as Parliament grapples with rising Brexit concerns.
August 1, 2019
EUR/USD 1.1060 GBP/USD 1.2120 USD/CAD 1.3222 AUD/USD 0.6850 USD/JPY 108.32 USD/CNH 6.9085 USD/ILS 3.5100 USD/MXN 19.1680 USD/CHF 0.9946 USD/INR 69.0650
The Federal Reserve delivered a hawkish hold as it cut the federal funds rate by 25 basis points to a range between 2% - 2.25%. While the market fully expected a downward adjustment to rates, many were expecting Fed Chair Powell to hint at future easing. However, he labelled the cut “a mid-cycle adjustment to policy” intended to “insure against downside risks” and would not commit to a long series of cuts. President Trump was open in his criticism, writing on twitter “As usual, Powell let us down”.GBP
The pound fell below 1.21 to the dollar for the first time since January 2017 after BoE officials left rates unchanged and maintained asset purchases at current levels. On the Brexit front, Boris Johnson ramped up his Brexit “do or die” pledge as the government set aside another £2.1 billion pounds to prepare for a no-deal divorce from the EU.EURThe euro touched a new 27-month low on the back of the Fed’s less-dovish-than-expected guidance. Upward revisions to July eurozone PMI data did little to protect the common currency as traders price-in further policy easing from the ECB in September.CAD
The loonie neared six-week highs as the Fed refrained from signaling an easing cycle and commodity markets rest in risk-off mode. PMI data out of Canada for July beat previous month’s numbers, but had little to no effect on the currency.ASIA/PACIFIC
The Japanese yen reached a two month peak above 109 in reaction to the Fed’s first-in-a-decade rate cut. Risk-off sentiment trickles back into the market as the currency recovers earlier losses.
Manufacturing readings in China delivered an upward surprise with the Caixin PMI arriving at 49.9 against an expected 49.5.