June 20 2019

June 19, 2019 (Western Union Business Solutions)  – The U.S. dollar fell after the Fed left interest rates unchanged but issued a dovish statement that validated market expectations of multiple rate cuts by year-end. As expected, the Fed left its main rate in a range between 2.25% and 2.50%.

The Fed’s interest rate forecasts ran the gamut with eight officials anticipating lower rates, eight expecting no change, and one seeing a rate hike by Christmas.

The Fed’s new forecasts for the U.S. economy this year left its growth outlook unchanged at 2.1%, while it expects lower unemployment (3.6% vs 3.7% in March) and lower underlying inflation (1.8% vs 2.0%).

The Fed said it would “act as appropriate” to help defuse threats to the economy from slowing global growth and trade wars.

Key for the dollar and Fed policy going forward will be coming data on June employment and second quarter growth and next week’s Trump-Xi meeting.

The market is pricing about an 85% likelihood of the Fed cutting rates when it announces its next decision on July 31.

Fed Chairman Jerome Powell is about to address the media so it may be a while before the dust settles on the central bank’s decision. But once it does settle, the market will be left with a U.S. central bank that may not be as dovish as rivals in Europe and elsewhere, a dollar-positive notion.

 

 


USA