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July 2017

US Dollar falls to a 13-month low

Published: Monday 14 August 2017

  • US Dollar falls to a 13-month low
  • Federal Reserve leave rates unchanged
By Charlie Horsley
The Dollar's broad based selloff resumed overnight after the Federal Reserve kept monetary policy unchanged. The move was seen as a reaction to the Federal Reserve's slight tweak in its description of inflation. Also, the indication that balance sheet normalisation would start very soon suggests that it will push another rate hike, if any, to December. Commodity currencies – AUD, NZD and CAD – are the best performers this week, as markets are in full risk-on mode.
The Federal Reserve left its monetary policy unchanged, maintaining the federal funds rate target at 1-1.25%. Also, policymakers revised the outlook on core inflation lower. The US Dollar plunged, with the trade weighted index falling to a 13-month low as the market interpreted the inflation assessment as dovish.
In Australia, Reserve Bank of Australia (RBA) Governor, Philip Lowe, warned that prolonged weakness in wage growth could hurt the economy. He emphasised that high wage growth was crucial for getting inflation back to target. He also noted that he was happy with interest rates as they are, as they are boosting the job market. Lowe also noted that a weaker AUD would help boost inflation and that was something he was aiming towards.

Datawise today, there is not a huge amount due to be released. US initial Jobless Claims data this afternoon will be an interesting prelude to Non-Farm data next week. For now, the US Dollar weakness that we have seen over the last 24 hours is likely to continue.
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