The US dollar weaker across a basket of currencies after the Federal Reserve cut the benchmark rate by more than expected yesterday morning. Equity markets soared over 4%, but the dollar fell after the US central bank slashed rates to 0% to 0.25%. Equity markets are lower this morning and the dollar continues to trend lower this morning as Morgan Stanley reported a loss of over $2billion worse than expected. In economic news, the US current account deficit narrowed more than expected in the third quarter, aided by the dollar strengthening 4% across major currencies.
The euro traded to a 2 ½ month high against the dollar after a drastic rate reduction by the US central bank. Further helping the euro are comments from the ECB that they are not in a hurry to reduce rates further in the euro zone despite recent economic reports that show otherwise.
The British pound weakened against the dollar and continues to trade at record lows against a basket of currencies. All indicators are pointing toward more rate cuts by the BOE. Minutes from the December 3-4 BOE meeting stated there were discussions to cut rates more than 100 basis points. In economic news, UK jobless claims rose more than expected and retails sales were worse than expected.
The Japanese yen rose to a new 13 ½ year high against the dollar as the US Federal Reserve cut rates to the lowest among the world’s major currencies.
With the latest move from the US Central bank, market participants are now pricing in a rate cut from BOJ this Friday from 0.30%.
The Canadian dollar continues to strengthen as oil and gold rise after yesterday’s US benchmark rate was slashed to near zero.
Both the Australian dollar and the New Zealand dollar rose against the dollar after the US cuts rates yesterday. The Aussie dollar jumped to 2 month highs and the Kiwi dollar at a 5 week high as investors jump back to higher yielding currencies.
The Mexican peso strengthened against dollar as Mexican stock markets were up 1% after yesterday’s US Fed announcement.
