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Fed pivot hits greenback
The US dollar was shocked lower overnight after the US Federal Reserve appeared to make a significant shift in its policy stance and opened the door to rate cuts in 2024.
The Fed kept official interest rates at a range between 5.25% to 5.50% but the post-decision statement signaled a clear change in expectations.
The updated projections now see official rates at 4.50% next year. Fed chair Jerome Powell noted that the central bank had discussed potential rate cuts next year. Powell also said the Fed would not wait for inflation to fall to its target of 2.0% — instead saying the Fed would need to move to reduce rates earlier.
The US dollar fell across the board with the USD index down 0.8% as it neared four-month lows.
The EUR/USD gained 0.8% while the GBP/USD climbed 0.5%.
In Asia, the USD/JPY collapsed, down 1.7%. The USD/SGD fell 0.6% and USD/CNH lost 0.8%.
Aussie, kiwi at highs
The Australian and New Zealand dollars surged higher with both currencies more sensitive to shifts in US interest rates.
US bond yields extended recent losses after they saw the biggest monthly loss in November since 2011. The US ten-year bond yield fell from 4.21% to 4.03% overnight.
The AUD/USD climbed 1.7% to near four-month highs.
The NZD/USD gained 1.1% to also near four-month highs.
BoE, ECB to keep the party going??
The next 24 hours see two more major central bank decisions.
The Bank of England meets at 11:00pm AEDT with markets now looking for the BoE to cut rates as early as June next year.
The European Central Bank meets at 12.15am with markets looking for a cut in April.
In both cases, any confirmation of rates cuts could see the GBP and euro weaker.
Locally, Australian employment is due at 11.30am. A recent weakening in Australian data has seen expectations muted with only 10k new jobs forecast.
Aussie, kiwi at four-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 15 December
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
