USD loses a little steam after post-Fed boost
The U.S. dollar is trading in mixed ranges, losing some ground against major peers following a day of Federal Reserve action that brought the Bloomberg Dollar Spot Index to its highest level since mid-August.
Indeed, the 25-basis-point interest rate increase materialized as many expected; however, the surprising element was the unanimous decision, unlike recent meetings that featured a lack of consensus. Ultimately, this event sent a message to markets that officials are willing to control inflation and do what is necessary to address what is considered the priority in a world plagued by “stagflation”—low growth and higher prices—as well as fatigue from the effects of armed conflict.
On the Middle East front, there was better news than earlier in the week from Saudi Arabia, which is hoping to resume roughly half the capacity of its East-West Pipeline in the next couple of days. Additionally, the country was able to successfully sell more oil to Asian refineries at locations near the Strait of Hormuz. When it comes to domestic data, the buck seems to be supported by decent retail sales figures, which jumped as a result of back-to-school purchases, while the labor market seems to be consistent with lower-than-forecast initial jobless claims for last week. It is worth noting, however, that housing starts and building permits for August came in with deeper contractions than anticipated. Tomorrow, we will get a chance to see how industrial production expanded last month. For now, the U.S. dollar has hit the brakes after advancing following the Fed presser.
What to Watch This Week…
- Bank of Japan Decision on Friday
- USA Online is always open
The complete Economic Calendar can be found here.
GBP
Pound sterling remains subdued after yesterday’s USD rally, hovering near its weakest value since the end of July. Nevertheless, the currency is picking up a little bit this morning following what appears to be a relatively “hawkish” Bank of England policy announcement. BOE Governor Andrew Bailey explained that while officials chose to leave interest rates unchanged, hikes are not out of the question at upcoming meetings, as the Iran war seems to have no end in sight. Inflationary pressures are keeping officials on alert, but traders are also watchful of movements in the Treasury “gilts” market after the BOE decided to scrap plans to sell long-dated bonds, thus setting aside quantitative tightening.