The AUDUSD at 0.6883 and the NZDUSD opens at 0.654 - both open higher this morning.
It was all about the US Federal Reserve overnight. They left their key interest rate in a range of 2.25-2.50%, but indicated a readiness to cut interest rates to sustain the US economic expansion. The Fed removed a reference in their statement to being “patient” on borrowing costs, forecast a larger miss of their 2% inflation target this year and mentioned an increased level of uncertainty in the economic outlook.
The USD fell, US Treasury prices rose (lower yields), and the equity markets made modest increases as ‘risk assets,’ such as the AUDUSD and NZDUSD, benefited from the Fed’s acknowledgement that interest rate cuts may be necessary. Seven of the 17 Fed policymakers indicated they it would be appropriate to cut the rate by 0.50% by the end of 2019.
The US Fed’s next meeting(30/31 July US time) is considered ‘live’ for a rate cut, particularly if economic data continues to deteriorate. The financial markets believe President Trump’s trade wars are slowing US and global economic momentum and that interest rates are too high given the lethargic inflation rate.
The GBP made gains overnight ahead of tonight’s Bank of England interest rate policy meeting.
RBA Governor Lowe speaks on the labour markets and spare capacity, both key considerations for monetary policy, at 12:35pm AEST in Adelaide.
Global equity markets were mostly sharply higher on the day - Dow +0.2%, S&P 500 +0.3%, FTSE -0.5%, DAX -0.2%, CAC +0.2%, Nikkei +1.7%, Shanghai +1.0%.
Gold prices gained 0.4% to USD$1,352 an ounce. WTI Crude Oil prices fell 0.6% to US$53.71 per barrel.
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