US dollar fights back as Powell tempers rate cut expectations…
The greenback took solace from Federal Reserve chairman, Jerome Powell’s, speech yesterday afternoon. The central banker indicated that the FOMC (Federal Open Market Committee) will need time to interpret the forthcoming economic data before deciding how to act. He also stated that it would be unwise for the Fed to react to short-term political pressures (President Trump continually beating the rate cut drum).
Yesterday’s speech allowed the buck to regain its composure. The $1.2750-70 resistance area held firm with the pound retreating all the way down through the $1.27 handle to its current price as European trade kicks-off at $1.2670. Across the board the US dollar saw strong gains – EURUSD fell by 0.60 cents to $1.1350 while the USDJPY rate has since leaped over 0.70% higher.
This development somewhat tempers expectations for a US interest rate cut next month even though pricing probabilities remain exceptionally high. One element which Powell’s speech reinforces is how important economic data now becomes. With the Fed closely monitoring all developments, each individual US report takes on additional value in defining whether a rate cut is required. This means one thing – heightened volatility!
Today is another big day for the GBPUSD pair with key events taking place both sides of the pond. In the UK, Bank of England governor, Mark Carney, will appear before a Parliamentary select committee to discuss the Bank’s latest inflation report. No doubt there’ll be ample commentary on the UK economy and Brexit. The afternoon session then sees an important US data release in the form of durable goods orders.
Written by Viv Savani. 8:29am, June 26th 2019
The details expressed in this market report are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Cornhill International Payments limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.