Powell in Focus

The USD Drops as The Fed Remains Dovish

Posted Wednesday, June 19, 2019 by
Rowan Crosby • 2 min read

The FOMC has backed up what many were thinking and has remained on a dovish course. That was the main takeaway from the latest FOMC meeting, which in turn led to some weakness in the USD.

Pointing to further economic, ‘uncertainties’, the members left their interest rate target unchanged at 2.25% to 2.5%. While clearly making reference to the US-China issues.

“The committee continues to view sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee’s symmetric 2 per cent objective as the most likely outcomes, but uncertainties about this outlook have increased.”

It now looks like the Fed is almost certain to cut rates by 50bp this year in two separate cuts. That was certainly the belief a number of major banks and brokers.

GOLD was a big mover on the session overall and is now well and truly through the 1350 level and closed around 1358. The SPX was higher on the session as a result, but only marginally.

The main mover was, of course, the USD. It is now down and pressing towards the key 97.00 level. Most of the majors did spike higher as a result but settled back towards the early levels by days end.


Asian Market Outlook

There are a couple of key events to get markets moving early in the Asian session. The NZD/USD will be on watch as we get the latest GDP figures where we are looking at 2.4% YoY.

Later on, we also have the BOJ Monetary Policy Statement. There is no set time for this release. The reality here is that the BOJ rarely changes much and the USD/JPY is more of a safe haven trade and responds to larger macro moves, more so than local data. As such this is interesting but not market moving.

The main one today will be when RBA Governor Lowe speaks. The AUD/USD has been weak after the RBA minutes on Tuesday and we are all hoping to get an idea of some further guidance as to whether we might be seeing more interest rate cuts sooner rather than later.

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