FX Currency: Dollar Hits 3-Week Lows on Fed’s Vow
FX CURRENCY – On Thursday, the greenback further declined against major peers. Moreover, the dollar slumped to three-week lows after the US Federal Reserve dialed back its forecast about the futures rates hikes for 2019. This was amid the escalating uncertainty about the outlook of the global economy.
The Fed placed the interest rates on hold after its Wednesday meeting. Further, it stated that it would be “patient” in deciding to make additional rate hikes this year. The Fed had withdrawn its guidance the need for “further gradual” rate hikes.
“The Fed has gone as far as expectations were raised in terms of being dovish…the responsive reaction by the Fed means that the chances of a recession have faded. The dollar index can hit 93.5 if the support level of 95 is broken. I expect commodity currencies such as the Aussie, Kiwi and Canadian dollar to do well,” said CMC Markets Chief Markets Strategist Michael McCarthy.
The US Dollar Index, which measures the greenback’s strength against major peers, dropped 0.13% to 94.91. Further, the record was near to a three-week low following Wednesday’s record of 0.5% decline.
The dollar had been on the back foot ahead of the dovish signal of Fed. This was along with the cautious approach of the policymakers in recent weeks following the fourth rate hike of the central bank last year.
Expectedly, analysts are bearish about the dollar’s outcome. In 2018, the greenback outperformed due to rate hikes and a strong economic outlook in the United States. Further, all of these factors surfaced amid the escalating pressure on global growth that attempted to affect the US economy.
FX Currency: Yuan climbs on PMI data release
On Thursday, the Chinese yuan increased following the release of the business survey data. The data made a slight movement in January however it revealed a contraction in the manufacturing sector.
The USD/CNY pair dropped 0.2% to 6.6971.
Moreover, the increase in yuan followed after the National Bureau of Statistics released China’s official Purchasing Managers’ Index (PMI) for January on Thursday. The PMI data climbed to 49.5 from 49.4 in December. The record was higher in comparison with the 49.3 expectation from the analysts. However, the data showed a second-time decline in China’s manufacturing sector.
For January, the services PMI recorded 54.7, higher than last December’s record of 53.8.
Meanwhile, traders maintained a cautious approach ahead of the outcome of the US-China trade talks scheduled on Wednesday. Both countries are attempting to reach a trade deal before the deadline on March 1.