"The current rate is appropriate" – These words by the Federal Reserve in December set the stage for a long pause in changing interest rates. The world's most powerful central bank's words accompanied the third consecutive cut of borrowing costs, that it had previously labeled as a "mid-cycle adjustment."
Technical traders are often looking for a double-top or double-bottom to confirm a line of resistance or support. Also for fundamental traders, sometimes repetition is needed to trigger a move. Jerome Powell, Chairman of the Federal Reserve, has said that he would personally raise rates only after seeing significant and persistently high inflation. That contrasts the reaction function for cutting rates seeing a change to the future outlook.
If the Federal Reserve's statement was not hawkish enough – Chair Jerome Powell confirmed the upbeat stance. However, one comment on rate hikes seemed to have reversed the course of the dollar's gains, sending it down. Fed Chair Jerome Powell has said that only a significant rise in inflation would trigger a rate hike.
Following its 2-day meeting, the Federal Open Market Committee (FOMC) on Wednesday announced that it lowered the benchmark interest rate by 25 basis points to the target range of 1.75% - 2% in a widely expected decision. Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, is scheduled to deliver his comments on the monetary policy outlook in a press conference at 18:30 GMT.
Lower rates tend to weigh on the currency – but the dollar advanced. While this may be attributed to a typical "buy the rumor, sell the fact" phenomenon, there are more significant factors.
The FOMC cut rates 25 bps, and there are some indications that it is prepared to do more. That said, not all committee members are on board with further easing. Incoming data will determine what the Fed does next.
EUR/USD has pared its gains that followed upbeat preliminary PMIs for Germany came out above expectations, pointing to a recovery. The USD is advancing amid fears of the coronavirus.
GBP/USD is trading below 1.31 after hitting a fresh high of 1.3172. The UK Manufacturing PMI beat with 49.8 and Services PMI with 52.9. The USD is gaining ground across the board.
The USD/JPY pair reversed its direction during the American trading hours as the risk-off atmosphere allowed the JPY to find demand as a safe-haven.
Despite appearances, Bitcoin is the asset with the best risk/benefit ratio. The current falls are adjusted to the ranges of the previous rise. Downward momentum expires in the first half of February.
The XAU/USD pair dropped to a daily low of $1556.70 during the European trading hours as the easing worries over coronavirus becoming a global epidemic and a broad-based USD strength put the pair under bearish pressure.
With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks.
In the US, the Board of Governors of the Federal Reserve (FED) meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency.
If rates remain unchanged, attention and also main news and analysis turn to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.
The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
Fed official website, on Twitter and Facebook
Jerome Powell
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31,
2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury
under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
Jerome Powell Fed's Profile and Wikipedia
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
