Dollar Falls on Warsh's Silence
The U.S. Dollar is down against most major peers following Federal Reserve Chair Kevin Warsh’s appearance at the annual International Monetary Fund meeting in Bangkok, Thailand yesterday evening.
This puts the Dollar on track for its first weekly loss since early September. Chair Warsh notably made no commentary on monetary policy or the economic outlook despite two hot inflation prints earlier in the week. This has led to Traders slashing bets that the Fed will hike interest rates at their October meeting. Warsh did reiterate the Fed’s commitment to restoring price stability but the lack of any hawkish signal, such as his comment at Jackson Hole in late August that the Fed had ‘work to do’, has put the Dollar under pressure. Despite this, Traders continue to price in one additional interest rate hike by years end, with a greater than 90% probability of such a hike occurring at the Fed’s December meeting.
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GBP
The British Pound is among the top performers in the G10 this morning after stronger than expected Gross Domestic Product (GDP) figures for August released yesterday morning have resulted in economists forecasting that the U.K. economy will grow by 0.4% in the third quarter, up from previous expectations of 0.2%. The year-over-year forecast has also been revised up to 1.3%. U.K. economic growth has now exceeded expectations for four consecutive months. This stronger growth has given the Bank of England room to tighten monetary policy, with Traders assigning a greater than 93% probability of a hike at the BoE’s November meeting.
JPY
The Japanese Yen is the G10s sole loser against the Dollar this morning following a speech written by Bank of Japan Governor Kazuo Ueda that was read by Deputy Governor Shinichi Uchida at the International Monetary Fund’s meeting in Bangkok. Ueda’s speech showed that the BoJ has no urgency to hike rates and provided no specific timing on when the next hike may come. It did reiterate that the BoJ will continue to hike rates in response to the economy, price growth, and financial conditions but noted that current financial conditions are accommodative. Traders do expect further tightening from the BoJ, with a roughly 75% probability of an interest rate hike occurring in December, but the IMF itself only projects one further hike on the opinion that flexibility is paramount.