Currency Markets are Mixed After FOMC Yesterday and BOE Rate Decision Today
Thursday 17 September, 2020
Daily Currency UpdateUSD - United States DollarThe U.S. dollar is mixed this morning, falling against the pound and Japanese yen, and making gains against the euro. After the Federal Reserves' stance on keeping interest rates in the U.S. at 0.00-0.25% out to 2023 announced yesterday. Chairman Jerome Powell commented that " more fiscal support is likely needed," and that the Fed cannot act alone. He continued that Congress will need to work quickly on another Covid19 relief package to keep stimulus measures well intact. Equity markets sold off in overnight trading, and US stock markets are all pointing to negative opens this morning. Couple the demand for oil falling around the world due to Covid19 economic slowdowns and closures. The IEA and OPEC both trimmed their 2020 outlook for the crude oil market, and large oil producers have signaled that demand might have peaked in 2019. This has put pressure on oil, and we see prices slip below 40 dollars a barrel on WTI today. The USD index was mostly unchanged, rising only 0.2% however, the EUR under performed. EUR/USD fell from 1.8880 to 1.1788 during trade as ECB officials expressed concerns that the recent EUR strength was having a dampening effect on inflation. USD/JPY also fell below 1.05 to touch a six week low of 104.81.
Key MoversThe major event from yesterday was the U.S. Federal Open Market Committee (FOMC) meeting, which failed to surprise markets as the current policy stance was retained. The committee insisted rates will be kept at the current level at least the next few years and reiterated it would aim for an inflation rate above 2% for some time.Today we had the Bank of England's official bank rate and monetary policy statement. The BOE maintained its benchmark interest rate at 0.1%, and as expected, it has kept its asset purchase facility at 745 bln. Answering market participants' questions, will they pump more stimulus into the UK economy through an increase in their bond-buying program as the UK prepares for an increase in unemployment with the end of the furlough scheme and any potential Brexit shock? The Bank of England had already cut interest rates to a record low of 0.1%, so it was highly unlikely they would go into negative territory.
- EUR/USD: 1.1737 - 1.1816 ▼
- GBP/USD: 1.2864 - 1.2982 ▼
- USD/CAD: 1.3180 - 1.3247 ▲
- AUD/USD: 0.7254 - 0.7311 ▼
- NZD/USD: 0.6674 - 0.6734 ▲