Last week several important economic updates influenced the Forex market. US preliminary GDP fell less than expected (0.6% actual vs. 0.7% forecast). Below you will find the key events to trade on during the week from August 29 to September 2.
Greenback dives to wager on Fed rate reversal
On Thursday, the evergreen buck faced heavy losses in Asia because the key US bank shocked the financial markets by giving up all of its plans to have rates lifted in 2019, which appears to be an indication that its three-year campaign to stabilize its monetary policy might be at an end.
Market participants rushed to price in the likelihood of rate cuts a bit later in 2019. Meanwhile, Treasury yields headed south to their lowest value since early last year.
The Fed's swerve pressured the evergreen buck, pushing it down to 110.67 yen – a 0.6% dive – the most impressive descend since the flash crash of early January.
As for the common currency, it rallied to a seven-week maximum, hitting $1.1424, rebounding from its recent minimum of $1.1177. It pushed the greenback down to 95.929 versus a group of currencies, having dived 0.5% overnight.
Previously, the Fed had tipped two rate lifts in 2019. Additionally, the major US financial institution also trimmed its estimates for inflation and economic surge, while increasing that for unemployment.
Yields on two-year notes headed south to 2.40%, which is in line with the effective funds rate, while five-year yields declined to 2.33%.
For the US currency, the only solace was the fact that other major banks worldwide have also turned quite dovish for recent months as surge speeded down pretty much everywhere.
The given need for stimulus simply means that many major financial institutions won’t be willing to see their currencies appreciate versus the evergreen buck, providing them with a reason to sound more accommodative.
Meanwhile, firm household spending along with business investment raised New Zealand’s GDP by 0.6% in the December quarter, assisting the New Zealand dollar to get to a seven-week maximum of $0.6923.
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The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.