As expected, the Fed lowered the range of federal funds rates to 1.75% -2.0% in order to protect the US economy from the global economic downturn, which was aggravated due to the US-Chinese trade war.
The central bank explained the decision to lower rates by slowing the global economy, increased uncertainty in the US foreign trade policy and restrained inflation, and announced the possibility of further reduction in rates. Nevertheless, the bank's leaders were divided on the decision on Wednesday and the prospects for further reductions.
Fed Chairman Jerome Powell said in a press conference following the meeting that, in his opinion, the US economic outlook remains positive, but the central bank promised to "take the necessary steps to extend the period of GDP growth".
The dollar reacted with restraint to the Fed decision, as it was expected by most market participants. It was even able to gain a foothold on the results of yesterday.
Futures on the DXY dollar index was trading at the end of yesterday with an increase of 38 points to the opening price of the trading day, near 98.13.
Participants in the US stock market also generally welcomed the Fed's decision.
On Thursday, another 2 of the world's largest central banks held meetings. The Bank of Japan and the National Bank of Switzerland refrained from changing their policies.
The central bank of Switzerland said that "the situation in the foreign exchange market remains unstable". The Swiss National Bank lowered its forecasts for inflation and economic growth and stated that the franc remained strong, indicating its willingness to intervene to restrain growth of frank as necessary.
Haruhiko Kuroda, the governor of the central bank of Japan, also stated a tendency towards easing monetary policy. “There are no signs of recovery in foreign economies,” said Kuroda.
Frank and the yen rose after the decisions of the Bank of Japan and the National Bank of Switzerland, including against the dollar, which is declining in the first half of today's trading day.
Now the attention of market participants is shifting to a meeting of the Bank of England, the decision on the rates of which will be published today at 11:00 (GMT).
It is widely expected that the Bank of England will not change its monetary policy.
On the eve of the Bank of England meeting, the pound is trading higher after the British Parliament blocked the possibility of Britain leaving the EU without a deal on October 31.
The threat of the “hard” Brexit has weakened. A “hard” Brexit, according to Mark Carney, would slow down the economy and push inflation up.
The Brexit theme continues to dominate the pound and determine its dynamics.
Any positive news regarding Brexit, especially the conclusion of a trade agreement with the EU, will lead to the strengthening of the pound.
Earlier this month, the pound also received support after the publication of positive macro statistics, indicating a decline in unemployment in the UK in May-July to 3.8% from 3.9% in April-June. The average earnings excluding bonuses in May-July increased by 3.8%, which is higher than the forecast of 3.7%, although lower than the indicator of April-June 3.9%.
The growth of British income is a positive factor for the pound, since it speaks in favor of an increase in spending on personal consumption and, accordingly, is an inflationary indicator.
Many economists believe that if it were not for Brexit, the Bank of England would now seriously consider raising interest rates.
However, the pound may again come under pressure when discussions resume on the possibility of a general election or early elections are announced.
Thus, the intrigue regarding the decisions of the Bank of England and its further actions remains. You need to be prepared for a sharp increase in volatility in pound trading before and after 11:00 (GMT), when the Bank of England decision on rates will be published, as well as the minutes from this meeting of the bank.
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