The dollar struggled near a seven-week low on rising expectations of a U.S. central bank interest rate cut.
Federal Reserve Chairman dropped his standard reference to the bank being “patient” in approaching a rate decision on Tuesday. He said instead it would respond as “as appropriate” to trade pressure. The Fed rethink lifted the euro and pushed investors into safe-haven assets including the Japanese yen. However, Wednesday’s small moves in the dollar index suggested markets had already priced in Fed rate cuts.
The European Central Bank meets on Thursday. Investors have their eyes on seeing how concerned policymakers are about signs of a downturn in growth. Speculation that the ECB will match Fed dovishness and possibly even announce looser terms for a new cheap lending scheme sent German 10-year government bond yields to a record low of minus 0.2250%.
Recession fears are sweeping across the world. Central banks have in recent weeks cut rates in what could signal the start of a global monetary easing cycle.
Australia’s central bank on Tuesday slashed benchmark cash rates to a record low of 1.25%. It signalled willingness to go further if the worsening outlook persists.
Last month, New Zealand’s central bank cut its benchmark interest rate for the first time in two-and-a-half years. It moved to support a cooling economy and counter global uncertainties.
START TRADINGForex – Dollar struggled on rising expectations of Fed rate cut
The dollar struggled, falling 0.1% to 97.059. It has fallen 1.3% from a more than two-year high of 98.371 touched on May 23.
Against the yen, the dollar edged down 0.2% to 108.125 yen per dollar. It was within striking distance of a five-month high of 107.845 hit during the previous session.
The Australian dollar rose 0.2% to $0.7000 as data showed growth in the Australian economy picked up only modestly in the first quarter.
The euro was up 0.3% at $1.1260, extending gains to a fourth session, and hitting a seven-week high.
Sterling rose to a seven-day high on Wednesday, helped by weakness in the dollar. A slightly better-than-expected reading of a closely watched survey on Britain’s services sector weighed too. Sterling has proven less resilient against the euro, where it remains near 5-1/2 month lows.
Oil prices resumed their slide on Wednesday, dragged down after an unexpected gain in U.S. inventories. Losses capped by a recovery in global equities on hopes of a rate cut from the Federal Reserve. Brent futures were down 17 cents at $61.80 a barrel by 1208 GMT, having briefly traded in positive territory earlier in the session. U.S. WTI crude was down 55 cents at $52.93 a barrel.
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Sources: Reuters, Investing, CNN money