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Currency Market Analysis

Sep 18, 2019 | Currency Market Analysis

Global Themes

Greenback weakens as focus turns to tonight’s Fed

The US dollar weakened overnight with markets on tenterhooks ahead of tonight’s critical meeting from the US Federal Reserve.

Markets have become suddenly less certain about the Fed’s move with the market pricing for a rate cut falling to 60% overnight from more than 80% at the start of the week (source: Reuters).

A move in the US repo market – a key interest rate market that provides short-term funding to financial institutions – might have contributed to the shift.  

Most analysts still expect the Fed to cut rates by 25 basis points to a new floor of 2.00%.

RBA caution

The greenback weakness helped the AUD after the local currency slipped back to two-week lows yesterday.

A more cautious statement from the Reserve Bank of Australia – which implied that further rate cuts will be required to get the unemployment rate to a lower target of 4.5% – pressured the AUD.

However, the greenback’s overnight fall saw the AUDUSD rebound to end the session flat.

36 red?

The Fed decision, due at 4.00am AEST, will be the major driver overnight.

In addition to the Fed, markets face a massive 36 hours, with NZ growth figures and Australian employment both due tomorrow.

Also tomorrow, the Bank of Japan, Swiss National Bank and Bank of England all hand down decisions.

By Steven Dooley, Currency Strategist APAC


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