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Currency Market Analysis

Aug 20, 2020 | Currency Market Analysis

Global Themes

USD stages comeback as Fed hesitates at next step

The US dollar roared back into life overnight after the US Federal Reserve surprised markets by stepping back from further moves in its massive monetary stimulus program.

Markets had expected the Fed to outline its plans for a “yield curve control” program – when the central bank intervenes in markets to control bond yields in certain time frames – but instead the Fed signals such a move might have little impact.

The Fed also moved back from proving further forward guidance – this will now be “sometime in the future” --- with the Fed saying government stimulus is the key requirement for economic support.

Greenback bounce

The Fed’s unexpected shift saw the greenback stage a massive comeback after the US dollar index fell to two-year lows earlier this week.

The US dollar surged versus all major currencies.

The USDSGD gained 0.4%.

The GBP saw the largest losses as tensions over the UK-EU trade deal reignited.

PMI due

The focus now turns to the latest global economic data with key manufacturing reading due over the next 48 hours.

Tonight, the US Philly Fed manufacturing index is due, while tomorrow sees a series of global PMI gauges.


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