Fed Cuts Interest Rates by 25 Basis Points

Xe Corporate APAC

September 18, 2019 2 min read

The AUDUSD opens at 0.6821 (mid-rate) and the NZDUSD opens at 0.6307 (mid-rate) this morning.

This morning the Federal Reserve cut its interest rate target range by 25 basis points to between 1.75% - 2.0%, citing global developments and muted inflation as reasons for the cut.

The voting committee is made up of ten members, seven of whom voted in favour of the 25bps cut, one who voted for a 50bps cut, and two members who voted to keep rates unchanged.

Jerome Powell has reiterated that the Fed will “act appropriately to sustain expansion” and has again stressed that they remain data dependent.

In response to this week’s funding pressures in money markets the Fed lowered interest on excess reserves from 2.1% to 1.8% while the rate for overnight repos was cut to 1.7% from 2.0%. Mr Powell also commented, "Such issues have no implications for stance of monetary policy,"

Looking at the latest Dot Plot it appears there is a growing divide among meeting participants (made up of both voting and non-voting members) of the 17 members 7 expect another rate cut before the end of 2019, 5 expect rates to remain unchanged, and 5 expect rates to be raised back to 2.0% - 2.25%.

The key driver for the Aussie dollar during our trading day will be this morning’s employment report with economists expecting jobs to increase by 15.2k and unemployment to remain unchanged at 5.2%.

For the Kiwi dollar, this morning’s Q2 GDP data release will be the key driver, with the market predicting the economy to have grown by a disappointing 0.4% following Q1’s 0.6% growth rate.

Global equity markets remain mixed - Dow -0.65%, S&P 500 -0.72%, FTSE -0.09%, DAX +0.14%, CAC +0.09%, Nikkei -0.18%, Shanghai +0.25%.

Gold prices are little changed trading at $1,498 an ounce. WTI Crude Oil prices are down 2.4% currently trading at $57.68 a barrel.

Upcoming Data Releases

  • NZ: GDP q/q - 08:45 AEST / 10:45 NZST

  • AU: Employment Report - 11:30 AEST / 13:30 NZST

Mid-Market Rates

AUDUSD0.6821-0.6%NZDUSD0.6307-0.8%AUDEUR0.6189-0.2%NZDEUR0.5723-0.3%AUDGBP0.5464-0.5%NZDGBP0.5053-0.6%AUDJPY73.97-0.4%NZDJPY68.39-0.5%AUDNZD1.08090.1%NZDAUD0.9248-0.1%GBPAUD1.83020.5%NZDCAD0.8388-0.4% GBPNZD1.9790.6%
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