US Dollar Stabilizes After Fed Rate Hike

Market Reviews

The US dollar stabilized against major currencies, as the small increase it received from the Federal Reserve interest rate increase has faded. For now, the dollar is the second strongest one for the week after the British pound. Meanwhile, euro and Japanese yen are trading as the strongest ones. The Canadian dollar falls amid deadlock in NAFTA negotiations.

As expected, the US Federal Reserve raised interest rates by 25 bps for the third time this year and removed from its official statement the words that the current level of rates contributes to the acceleration of economic growth. The statement said that the Fed still expects one rate hike in December, another three in the next year and one increase in 2020. But Fed no longer mentioned policy as “accommodative.”

According to Fed forecasts, GDP growth will slow from 2.0% in 2020 to 1.8% in 2021. Meanwhile, unemployment rate is also projected to rise from 3.5% in 2020 to 3.7% in 2021.

US stocks fell after Fed announcement. DOW closed down 0.40%. S&P 500 dropped by 0.33% and NASDAQ lost0.21%. US 10 year bond yield fell by 0.041 to 3.061. 30 year yield was down 0.042 at 3.191. On Asian markets, Nikkei lost 0.65%, Hong Kong HSI fell by 0.45% and China Shanghai SSE dropped by 0.39%. Meanwhile, Singapore Strait Times bucks gained 0.49%.

The New Zealand dollar remains steady after RBNZ kept OCR unchanged at 1.75% as widely expected and delivered no surprise to the markets. The central bank also said that the direction of the next OCR movement could be up or down, depending on economic indicators. The RBNZ noted that employment remains around a sustainable level, and consumer price inflation remains below 2%.

Japan and the US agreed to start bilateral trade talks after meeting of Prime Minister Shinzo Abe and US President Donald Trump. In a joint statement, the two countries said that during the talks "they will respect the positions of another government."