Dollar steady after Fed hold leaves rate path murky
SHANGHAI/SINGAPORE: The US dollar steadied on Thursday after the Federal Reserve held interest rates as expected while hinting upcoming inflation data would influence future policy moves, leaving investors uncertain about the rates outlook. The Fed opted to delay any changes to borrowing costs until after next week’s midterm election in a 10-2 decision, which came with an upgraded assessment of…
The US dollar remained stable on Thursday following the Federal Reserve's decision to maintain interest rates, while the central bank hinted that future policy changes would depend on upcoming inflation data. The Fed opted to postpone any adjustments to borrowing costs until after the upcoming midterm elections, indicating a "strong pace" of economic growth.
This assessment, combined with Fed Chair Kevin Warsh's belief that inflation can be brought down to the 2% target without slowing growth or increasing unemployment, led to traders reducing expectations for rate hikes in 2027. The euro weakened by 0.15% to $1.1134, while the dollar rose by 0.14% to 158.045 yen. However, Warsh's inability to provide a clear indication of a potential December rate hike was seen as dovish, or insufficiently hawkish, by currency strategist Carol Kong.
The market currently anticipates a 78% probability of a rate hike in December, according to the FedWatch tool. The dollar index, which gauges the greenback against a basket of six currencies, stood at 102.26. Oil prices fell as hopes for peace in the Middle East counteracted fears of escalating conflict. The Treasury yield curve steepened as Warsh commenced his press conference, with the 2-year note yield falling to a low of 4.678%.
J.P. Morgan Asset Management's Kerry Craig noted that the meeting's outcome provided the market and the Fed with time to evaluate forthcoming jobs and inflation data. Nevertheless, the market's dovish reaction suggests that yields will likely remain within a narrow range unless there is a clearer signal for more aggressive policy tightening or a shift towards rate cuts.
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Also reported by 5 other outlets
- Dollar steady after Fed hold leaves rate path murky freemalaysiatoday.com
- Dollar falls after Fed holds rates steady nst.com.my
- Fed holds rates, says data will guide next move economictimes.indiatimes.com
- News Wrap: Fed holds interest rates unchanged as inflation remains elevated pbs.org
- Australian Dollar edges higher above 0.7050 as hot CPI lifts RBA rate hike odds fxstreet.com
