Home Daily Commentaries The U.S. dollar falls, even though the U.S. “economy and monetary policy right now are in a good place.”

The U.S. dollar falls, even though the U.S. “economy and monetary policy right now are in a good place.”

Daily Currency Update

USD - United States DollarFollowing the Fed announcement, which held interest rates on hold at 1.75 percent, Fed Chair Jerome Powell said at a news conference yesterday, “…both the economy and monetary policy right now are in a good place." The Fed signaled it would keep interest rates on hold through 2020, as long as the economic outlook doesn’t change. Part of the FOMC statement that summarizes the Fed’s message was, “The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective”.The U.S. dollar declined, while U.S. stocks edged higher. The relationship between the price of the U.S. dollar and U.S. stock prices has been very irregular this year. Both sometimes move together and sometimes move in the opposite direction, like in yesterday's session. The EUR/USD increased (weaker U.S. dollar) 0.35 percent, but the EUR/USD moved in a 0.68 percent range during yesterday’s session. At this moment, the EUR/USD is trading within a choppy range between 1.1124 and 1.1155, due to ECB President Christine Lagarde's speech from Frankfurt.

Key Movers

The only driver for the Loonie will be Governor Poloz's speech scheduled today at 12:30 pm. Market participants are anxious to hear if Poloz will downplay the bad jobs numbers released last week. Poloz has also just announced he will step down in 2020. The soft momentum of the Loonie might be confirmed with Poloz's speech.The European Central Bank (ECB) decided that the interest rate on the marginal lending facility will remain unchanged at -0.50 percent. Furthermore, the Governing Council expects the key ECB interest rates to stay at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon. Christine Lagarde, the new ECB president, said that the “downside risks” from issues such as the trade war and Brexit are diminishing. Lagarde also hopes that the U.K.‘s future will be brighter tomorrow once the polls close at 5:00 pm EST later today. In general, Lagarde's speech was not hawkish or dovish regarding the ECB monetary policy, and EU growth was revised lower and inflation higher. The EUR/USD does not have a clear direction at the time of this writing.China's yuan market participants seem unperturbed by the approaching Dec. 15th tariffs. Even Chinese officials are expecting President Donald Trump to delay the tariff increases. The USD/CNH pair has traded in a range of 7.0175 and 7.0415 over the last six days. Furthermore, bets on sophisticated financial instruments show that the demand for adverse outcomes that would affect negatively the Chinese Yuan relative to positive outcomes that would help the Yuan are at their lowest since July 2019, which shows optimism for this Sunday’s deadline.

Expected Ranges

  • USD/CAD: 1.3145 - 1.3219 ▼
  • EUR/USD: 1.1092 - 1.1155 ▼
  • GBP/USD: 1.2800 - 1.3333 ▲
  • AUD/USD: 0.6885 - 0.6922 ▲
  • NZD/USD: 0.6561 - 0.6620 ▲