Daily Market Update

U.S. Dollar Rejoices after Optimism Pours from Fed Meeting 

September 21, 2017

USD

The U.S. Dollar is looking great this morning after a surprisingly upbeat FOMC announcement and Chairwoman Janet Yellen’s long press conference in which she stated that she’s determined to serve her entire term as head of the Fed. Outlooks for Gross Domestic Product growth and lower unemployment were upgraded, signaling plenty of confidence to traders and investors who felt the Fed would be less optimistic.

Natural disasters may slow Q3 progress, Yellen noted, but will not negatively impact the economy or the central bank’s dot plot. Chances of a hike in December are up to 63.8% and officials plan to see three more increments in 2018.

A few currencies bounced back throughout the Asian and European sessions, but the buck sustained most gains. On average, the greenback is over half a percent stronger than most counterparts and stands at its best level in over three weeks, per the Bloomberg Dollar Spot Index. We shall see if a slew of data next week, that includes GDP, income, and spending measures will keep the dollar rolling or halt its momentum. USD rallies have been short-lived throughout the year.

 

JPY

The Japanese Yen has fallen by 4.5% thus far in September, primarily the result of renewed risk-appetite and a dovish Bank of Japan. The meeting earlier resulted in a shocking push by one official towards more accommodative measures, stating that the bank’s inflationary targets will not be reached by 2019 otherwise.

Deflationary pressures remain a major struggle for the economy, but the recent focus by the central bank has been to control the yield curve to keep rates from getting too deep into negative territory. Policy divergence with the U.S. is once again the catalyst that keeps Yen under pressure, now at its weakest level in over two months.

 

AUD

The Australian Dollar is down to its lowest level in a month following the dovish stance by the Reserve Bank of Australia. Officials did not see room in the economy for hiking interest rates and the Fed announcement of the opposite led to the dramatic fall.

More importantly, iron ore prices are low after a downgrade to steel production pummeled bets on the raw material, a major source of Aussie strength. It is worth remembering that the U.S. Dollar has had no breaks against the Oceanic currency, which is up 10.3% for the year.

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