31.10.2019: USD weakens after Fed’s interest rate cut (USDX, JPY, USD, AUD)


During the Asian session, the US dollar remained weak due to the Fed’s decision on its key rate and Jerome Powell’s speech. Yesterday, the Federal Reserve cut its interest rate by 25 basis points as expected. In the text of the Fed’s statement, there were no words about economic stimulus measures. Investors took it as a signal that the Fed would take a pause in the rate-cutting cycle. Therefore, it was surprising why the US dollar did not gain ground amid such rhetoriс. It happened because of Jerome Powell’s speech that caused a lot of debate. According to Mr. Powell, the unstable growth of inflation in the United States prevents the Fed from raising the key rates. Jerome Powell estimates the current stance of monetary policy as the most appropriate but only if macroeconomic data corresponds to the Fed’s forecasts. After that, the greenback slid down against its major rivals. The US dollar index, which measures the greenback’s strength against a basket of six major currencies, sank by 0.32%, falling below 97.30. This morning the results of the Bank of Japan’s meeting were announced. The regulator decided to keep its ultra-loose monetary policy. Versus the yen, the US dollar tumbled to the level of 108.60. The yen rose amid uncertainty over the US-China trade deal. The trade agreement was scheduled to be signed during the APEC trade summit in Chile but yesterday Chile’s President canceled the summit in November after several weeks of violent unrest. In the meantime, the publication of weak data on China’s business activity index (PMI) has fueled market fears over the prospects for the global economy. In October, the index dropped from 49.8 points to 49.3 points. This is the lowest level in the last eight months. The Australian dollar has updated its 3-month highs around 0.6930 despite weak data on China’s PMI. The Aussie inched up amid upbeat data on Australia’s construction sector which showed a sharp surge in October. Today’s economic calendar is quite eventful. Germany will release data on retail sales. The eurozone will publish data on inflation and GDP. In the New-York session, the US will unveil the report on personal spending. GDP data from Canada is due today too. Moreover, traders continue to follow the news on the US-China trade negotiations. That’s all for now! We wish you profitable deals! See you!

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