Jane Foley, senior FX strategist at Rabobank, points out that the USD is the worst performing G10 currency over the past 24 hours on the back of a more dovish than expected policy message from the Federal Reserve last night.
“While a dovish central bank is a currency negative factor, the outlook for the USD crosses must also be seen in the context of the fundamental backdrop for other currencies.”
“The anticipation that policy will be more accommodative than expected going forward has eased fears about declining USD liquidity and lifted risk appetite across the board. However, parts of Powell’s message were far less market friendly.”
“Powell cited his concerns regarding the risks of a sharp US economic slowdown due to cooling growth in Europe and Asia. He also confirmed that officials were paying close attention to policy-related headwinds from trade disputes and suggests that “these risks are going to be with us for a while”. These remarks do not describe a backdrop which is conducive to supporting risky assets. In view of this backdrop we expect that the USD will perform well vs. many Emerging Market currencies this year.”
“Although the Fed’s more dovish tone will limit upside potential for the USD vs. EUR in the coming months, we continue to expect choppy conditions for EUR/USD close to recent ranges as the market reacts to incoming data from both the US and the Eurozone.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.