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.
In his prepared remarks delivered at the Jackson Hole Symposium, Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, said that the US economy was in a 'favorable place,’ and added that the Fed will 'act as appropriate.'
"The most powerful central banker in the world" – is how we and others characterize Fed Chair Jerome Powell. While that may be true – monetary policy is reaching its limits – especially in the face of a trade war.
EUR/USD has dropped sharply below 1.10 after German Manufacturing PMI dropped to 41.4 and other figures are disappointed. Fears of a recession are mounting. ECB's Draghi speaks later.
GBP/USD is trading below 1.25, little changed. PM Johnson has expressed optimism ahead of meetings with EU leaders in New York. The opposition Labour Party's is trying to iron out its position on Brexit.
USD/JPY holds firmer starting out the week, as the optimistic sentiment for trade talks remains on track. However, the further upside remains capped by falling Treasury yields-led broad USD weakness.
Gold edged higher through the early European session on Monday and is currently placed at over one-week tops, around the $1520 region.
Today is the day – the release of futures on Bitcoin by ICE – owner among others by the all-powerful NYSE. This initiative, channeled through the trading platform Bakkt, will allow trading futures on Bitcoin with delivery to maturity.
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.
