Dollar Mixed Following Central Bank Decisions

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Dollar Mixed Following Central Bank Decisions

SEPTEMBER 17, 2020

The U.S. Dollar is stronger this morning as reports indicate that the U.S. Congress may be ready to pass a rescue/spending package.

Overview

The last two weeks have been frustrating, as even explained by Fed Chairman Jerome Powell, in regard to clarity and certainty over a much-needed bill that can assist with Fed measures that have adopted to ease the economic pain from COVID on businesses. Although yesterday’s Fed meeting decision announcement pointed at maintaining a very accommodative financial environment with low rates until 2023, the buck did not buckle and found at least comfort in the stability the Fed provides with such language.

Data continues to point at an American economy still battling plenty of obstacles yet improving particularly as labor is becoming more predictable. Jobless Claims for last week revealed that initial applicants are at about 860K, but continuing claims have slowed down.

Housing and Building Permits did slow down in pace only slightly, but the Philadelphia Fed Business Outlook came right in line with estimates. The election will also create further volatility for the buck, but you are seeing a reduction in the appreciation of other currencies as U.S. progress starts catching up to other regions. Because of the swings, the Bloomberg Dollar Spot Index remains even for the week.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

You’re invited to today’s ‘Cocktails & Currencies’ event…

JPY

The Japanese Yen has strengthened by 1.8% thus far in September riding primarily off of faith in Asian markets as well as a determined government. The fight against COVID has been tough, but Japan has held better than most while adjusting to aid industries damaged. Recent changes in government with Prime Minister Shinzo Abe have not affected the country.

Yesterday’s Bank of Japan meeting improved sentiment for the currency with the announcement of leaving interest rates untouched and no changes to stimulus nor the yield curve. Any hits to tech stocks can also translate into further fuel for the safe-haven Yen.

GBP

Pound Sterling is on a bit of a dive following the Bank of England meeting in which negative interest rates were mentioned as a possible arsenal to use down the line. Much like the Fed, BOE officials promised they will keep a very patient eye on inflationary growth and will not be tightening interest rates any time soon until there is a significant rise in prices.

Additionally, the policymakers said they would engage with regulators on how to implement negative interest rates. This mixed with the instability and potential devastation over a botched Brexit do not ply well for Sterling fortunes and we are seeing it materialize.

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