The U.S. dollar came under heavy pressure yesterday and continued to drop overnight.
Overview
The Federal Reserve kept rates unchanged yesterday but gave every indication that rate cuts are coming in the near future. Indeed, traders began to price in the possibility of a 50-point reduction as early as July after the central bank dropped the reference to being “patient”. Stocks rallied on the dovish outlook but at the expense of the greenback.
Expect the dollar to continue to absorb the news throughout the day. A slew of second-tier data including jobless claims and the Philadelphia Fed business survey are on today’s docket but are unlikely to knock the Fed out of the headlines. Bloomberg’s consumer comfort and economic expectations will cross the wire later today.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
GBP
The British pound took advantage of a floundering greenback overnight as the political landscape in Britain starts to clear up. Boris Johnson has increased his lead to become the next Prime Minister next month by securing 143 votes, more than double his next rival.
This morning the Bank of England joined the chorus of dovish central banks. While the BOE did not cut rates, they did slash their growth forecasts while fingering the Brexit uncertainty and the ongoing trade war as the culprits. This should limit the sterling’s gains.
CAD
The Canadian dollar and commodity-based currencies, in general, were also given a boost as the price of oil spiked as tensions with Iran worsened after Iran shot down an American drone.
NZD
The Norwegian krone was the biggest mover over the last 24 hours, gaining over 2.0% against the U.S. dollar. On the backdrop of a dovish Fed, the Norwegian Norges Bank went the other direction by hiking interest rates. Their forward guidance became more hawkish as well, as the bank indicated more rate hikes are on the way.
