Fed hits “skip”, but warns of more hikes to come
The US dollar fell to new one-month lows overnight after the Federal Reserve kept rates on hold but a warning that the US central bank expects to hike rates on two more occasions this year saw a late rebound.
The greenback, as measured by the USD index, fell to the lowest level since 17 May after the Fed decided to pause its rate-hiking cycle after 10 consecutive rate hikes since March last year.
But the latest projections from the Federal Reserve – the so-called “dot plots” – indicated the Fed expects to raise rates above 5.60%.
Fed chair Jerome Powell also poured cold water on hopes for rate cuts, saying he needs to see “inflation […] coming down really significantly […] we’re talking about a couple of years out.”
USD lower, but warning sees late bounce
The post-decision commentary saw the USD index rebound, but it still ended at one-month lows.
Across markets, the USD’s late rebound saw the AUD/USD hit four-month highs before later easing. The AUD/USD gained 0.4%.
The NZD/USD was the clear outperformer with the pair up 0.9%.
The USD/SGD fell 0.1% while the USD/CNH was flat.
China, Europe policy decisions due
The Chinese yuan is likely to remain in focus today with further easing from the People’s Bank of China seen as likely, with the one-year medium term lending facility to be potentially cut, according to economists.
Key Chinese data, including retail sales, May industrial production and fixed asset investment, are all due at midday AEST. This data will provide further detail on recently-flagging Chinese recovery.
Other key data due this morning includes NZ GDP and Australian employment.
Later tonight, all eyes are on the European Central Bank, with markets seeing a 98% chance of a 25-basis point hike (source: Refinitiv).
Aussie, kiwi extend rally after Fed
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 12 – 17 June
All times AEST
Have a question?[email protected]
*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.
