The Fed joined global peers signalling interest rate cuts beginning as early as July. The Fed’s rate signal came before meetings at other major central banks in Asia and Europe.
The BoE message was far less dovish than the U.S. Federal Reserve and European Central Bank.
The Bank of England slashed its second-quarter growth forecast and flagged risks from global trade tensions and a no-deal Brexit. The central bank’s policymakers, as expected, voted unanimously to keep interest rates on hold at 0.75%. BoE maintained its message that rates would need to rise gradually – as long as Britain can avoid a no-deal brexit.
The Fed joined global peers such as the ECB and the Australia’s central bank this week in signalling that more policy stimulus is needed to boost growth. Fed said was ready to act in the face of growing economic risks. That fuelled a rally in relatively higher-yielding currencies such as the Australian dollar. The dollar fell and benchmark bond yields dropped to multi-year lows. The Fed’s rate signal came before meetings at major central banks in Asia and Europe that were expected to flag similar moves.
Bucking the global trend of dovish central banks, Norway’s central bank raised interest rates. Norges Bank predicted more rate hikes in the coming months.
The Bank of Japan left rates unchanged on Thursday but stressed that global risks were rising, suggesting it was leaning toward boosting monetary support.
Still, some investors expressed doubt over how much cutting rates could do to improve growth.
START TRADINGForex – Central banks weigh on trading
The sharp fall in the dollar took currency markets by surprise. It forced some hedge funds that had built up large long dollar bets before the rate decision to dump the greenback. The widespread dollar weakness boosted appetite for risk-oriented currencies.
The dollar sank broadly against its rivals on Thursday and is on track for its biggest two-day drop in a year. The U.S. central bank signalled it was ready to cut interest rates as early as next month. The dollar fell 0.5% to 96.64, on course to posting its biggest two-day losing streak since February 2018.
It also retreated by 0.5% to a six-month low against the Japanese yen at 107.47.
The Australian dollar and the New Zealand dollar gained 0.5% each.
Sterling gave up some of its gains versus the dollar and dropped against the euro on Thursday. The pound, trading around $1.2720 before the BoE announcement, had fallen to around $1.2680 by 1210 GMT, still 0.3% on the day. Against the euro, the British currency extended its losses and was last down 0.5% at 89.175 pence.
Oil prices jumped by more than 3% after Iran shot down a U.S. drone that its Revolutionary Guards said was flying over southern Iran. Fears of a military confrontation between Tehran and Washington grow.
Brent crude, was up $2.06 at $63.88 a barrel at 1335 GMT, having earlier gained 3.4% to $63.93. U.S. WTI crude rose $2.33 to $56.09.
Gold soars to five-year peak as U.S. Fed signals rate cut. Spot gold was up 1.6% at $1,380.96 per ounce as of 1213 GMT, after hitting its highest since March 17, 2014 at $1,386.38. Gold prices have gained about $80 so far this month.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money