Fed Sets Stage for Looser Policy
The trade war, which was initiated by US President Trump against China, is now impacting the US Dollar. Expectations that the Federal Reserve will be compelled to cut interest rates given the risks to the trade conflict and the slowdown in global growth. Yesterday, Jerome Powell, the head of the US Fed, said it would consider loosening policy in response to trade pressures, “as appropriate,” dropping the usual reference to a call for patience. As a result of a sentiment shift, the US Dollar Index has been trading near to a 7-week trough, and the greenback pushed lower against both the safe haven Yen and the Euro.
As reported at 11:25 am (GMT) in London, the EUR/USD was trading at $1.1273, up 0.1635% and off the session peak of $1.12887 while the low was posted at $1.12506. The USD/JPY was trading at 108.3080 Yen, up 0.1433% and moving off the session low of 107.970 Yen. The GBP/USD was trading at $1.2709, a gain of 0.0945%; the pair has ranged from $1.2691 to $1.2724 in today's session.
ECB Decision in Focus
Market focus will turn to the European Central Bank where the rate setting committee is due to announce policy tomorrow. Analysts and economists have predicted that the ECB will leave rates at the current levels but feel that the statement which follows is very likely to track the Fed's latest noise; in other words, global growth will be carefully watched with an eye to a looser monetary policy to stimulate productivity in the EU area. Just yesterday, the Reserve Bank of Australia lowered its benchmark rate to 1.25% and said more moves could occur if the economy worsens.