(Bloomberg) -- The dollar pared losses after Chair Jay Powell said the scope of the Federal Reserve’s decision to lower benchmark rates by a half percentage point doesn’t represent a new pace of moves from the central bank.
- The Bloomberg Dollar Spot Index fell as much as 0.6% after the FOMC release its rate decision before paring drop; now down 0.1%
- FOMC voted 11 to 1 to cut federal funds target rate range by 50bp to 4.75% to 5% after holding steady for more than a year
- “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” statement said
- Policy-sensitive two-year yield dropped as much as 6.7bp but is now little changed at 3.60%
- Read more: Traders Bet on More Easing as Fed Opts for Half-Point Rate Cut
- “We were unsure if the dollar weakening over the last month was going to turn around or not, but this pretty clearly shows me that we’re entering new ranges,” said Helen Given, a foreign-exchange trader at Monex Inc.
- “Powell was surprisingly balanced” during the press conference, said Win Thin, global head of markets strategy at Brown Brothers Harriman
- USD/JPY tumbled as much as 1.4% to 140.45 session low, then paring losses to trade 0.2% lower
- The Bank of Japan will start a two-day meeting on Thursday
- Read more: JGB Yield Curve Points to Low Odds of BOJ Hiking Rates This Year
- GBP/USD jumped to day’s highs after Fed rate cut before ending higher by 0.4% at 1.3214
- Earlier, cable met support after data showed UK consumer prices rose 2.2% from a year earlier, the same pace as in July and below the BOE’s forecast
- Traders pared bets on BOE’s own interest-rate cuts after UK services inflation rose to 5.6% in August from 5.2% in July; central bank releases decision Thursday
- EUR/USD rallied to 1.1189 session high before paring gains
- Some information comes from an FX trader familiar with the transactions who asked not to be identified because the person isn’t authorized to speak publicly
Reporting by Carter Johnson and Vassilis Karamanis With assistance from Matthew Burgess, Masaki Kondo and Anya Andrianova.
