Fed’s comments that it does not see a readjustment of rates in the near term supported the dollar. The U.S. Federal Reserve left borrowing costs steady on Wednesday.
Fed Chair Powell said the factors dragging on inflation might be “transitory”. He saw no case for a rate move in either direction. Powell’s comments on Wednesday led foreign-exchange markets to dial back some of their bets that U.S. rates would fall by the end of the year. His remarks came after Wednesday’s Fed meeting left rates unchanged, as expected.
Fed policymakers said ongoing economic growth, a strong labor market and an eventual rise in inflation were still “the most likely outcomes”. The U.S. expansion nears its 10-year mark.
The Bank of England is widely expected to leave interest rates on hold, but its comments might shift future rate expectations.
A positive tone on U.S.-China trade negotiations to end some tariffs has also aided traders’ sentiment. A possible deal to end a long-draw dispute between the two economic giants may further boost risk appetite
Japan is out for a week of holidays and trading will resume next Tuesday. China will be back in action on Monday. Tokyo is one of the world’s top five currency trading centres. Therefore, traders are worried that the absence of Tokyo might fuel some exaggerated moves in foreign exchange markets.
START TRADINGForex – Fed’s neutral message revived dollar
Overall volatility in the forex markets remained near five-year lows.
The dollar held on to overnight gains after the U.S. FED kept the target range for its policy rate unchanged. The dollar index held at 97.62 against a basket of major currencies after going as high as 97.728 on Wednesday. Dollar hawks also received a boost from early data on the labor market.
Greenback stood at 111.61 yen after consistently easing from a four-month high of 112.39 touched last week.
The euro gained a fifth of a percent to $1.1219 but was still within sight of a two-year low hit last week. The euro’s tiny gains in quiet trading were in contrast to overnight volatility in the greenback.
Sterling held below a two-week high on Wednesday by signs of a possible breakthrough in Brexit talks ahead of a central bank meeting. The pound was last at $1.3054, having been as high as $1.3101 overnight ahead of a BoE rate decision. The pound weakened slightly 0.1% on the day. It also weakened to the day’s low against the euro, softening 0.2% to 86.05 pence. .
Commodities, Metals – Oil down on record US crude output
In commodities, oil prices fell after data showed record U.S. crude production output last week, to their highest since September 2017. However, outside the United States, however, oil markets remained tight due to the Venezuela intensifying crisis and stricter US sanctions against Iran. Brent crude, the global benchmark, were at $71.57 per barrel at 0837 GMT, 61 cents below their last close. U.S. West Texas Intermediate crude fell 60 cents at $63.00 per barrel.
Gold on Thursday fell to its lowest in a little over one week, after Fed’s neutral message. FED’s Powell dashed hopes of a near-term rate cut, boosting the dollar and treasury yields. Spot gold shed 0.4% to $1,271.06 per ounce as of 0809 GMT. U.S. gold futures fell 0.9% to $1,272.60 an ounce.
Silver fell 0.3% to $14.63 an ounce, holding close to a more than four-month trough of $14.57 from Wednesday.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money