Fed dovishness does not hurt the dollar

Expert market comment from senior analyst Alex Kuptsikevich of the FxPro Analyst Team: Fed dovishness does not hurt the dollar
FxPro | 961 hari yang lalu

The Fed left its key interest rate unchanged, and the forecast for its reduction this year was unchanged, but it supported risk appetite in the global markets. After the announcement, the US dollar accelerated its decline, losing around 1% from peak to trough. All three major US stock indexes hit all-time highs, and gold rallied to new highs.

Markets were encouraged by Powell's words that his view of the inflation outlook had not changed in recent weeks. Remember that during this period, inflation reports have come in above expectations and questioned the downward trajectory.

Another positive was the removal of risks that the FOMC would reduce the number of projected rate cuts.

Also positive was the confirmation of the previously announced plans to reduce the pace of securities sales from the balance sheet. This will add some liquidity to the financial system, which is supportive of risk demand, although the overall impact is relatively small.

The dollar's reaction is in line with our earlier expectations. The Fed's dovish tone triggered an impulsive sell-off in the dollar, with the DXY falling sharply below its 200- and 50-day moving averages.

As expected, and as we wrote before the release, the dollar's downward momentum does not look sustainable, given the strong technical picture that has been building over the past few weeks.

From a fundamental perspective, it isn't easy to sell the dollar when other central banks are set to follow suit. At the end of last year, there was speculation that the Fed would be the first to ease, which weakened the dollar. However, a strong economy and labour market have levelled the playing field. In addition, the SNB unexpectedly cut rates by 25 basis points on Thursday, highlighting Europe's willingness to ease.

The expected synchronised easing by the world's major central banks is feeding buyer interest in equity markets.

By the FxPro Analyst Team

FxPro
Tipe: NDD
Regulasi: FCA (UK), SCB (The Bahamas)
baca selengkapnya
Stocks sink amid AI wipeout, dollar shines ahead of NFP

Stocks sink amid AI wipeout, dollar shines ahead of NFP

Nasdaq leads equity losses as AI outlook dims on fears of datacentre revolt. AI rout deepens in Asia but US futures point to some easing in selloff. Gold’s rebound hits a wall as traders turn to the safety of US dollar. Attention to turn to NFP report as December rate hike bets fade.
XM Group | 1 hari yang lalu
The dollar saves the day

The dollar saves the day

The dollar rebounds as the AI-driven S&P 500 sell-off boosts safe-haven demand, while the BoE’s first hike since 2023 fails to support the pound.
FxPro | 1 hari yang lalu
Tech Stocks Lead US Selloff Ahead of Payrolls

Tech Stocks Lead US Selloff Ahead of Payrolls

AI-related shares led the worst US equity session since 2020 as investors feared tighter oversight of AI and data-center buildout following the midterm results; Truist called it a “buyers’ strike in tech.” The selloff is spreading beyond Wall Street: Korean chipmakers fell about 10% before the open, the Kospi dropped below 5,000, CoreWeave’s five-year credit default swap widened to a record
ATFX | 1 hari yang lalu