The dollar collapse currency market to levels 2017
Yesterday the markets were hopeful for a reduction of the key rate by a quarter percentage point to a target range of 2% to 2.25%. Well, the fed met expectations, warning that such a gesture should not be considered the beginning of a long series of easing. And although it may not be the last downgrade in 2019, the markets optimism already lost. Due to the shattered plans to the results of the September meeting, the dollar, as the dollar index began to grow. At the same time, the major stock indexes – on the contrary, showed a drop of more than 1%.
Asian markets today are moving in different directions: the index of China losing ground, while Japan’s Nikkei totally dominated versie losses that accompanied the weakening of the yen after the publication of the fed decision.
I must say that the meeting could be a turning for both the us currency and markets in General. During the previous two cycles Federal funds rate has decreased by more than 5 percentage points. Now the fed has no such leeway, because now the spending reduction account a starting point to 2.25%-2.50%. Powell tried to convince the markets that the current situation differs from the two previous cycles, but, apparently, in vain. If economic data in coming days and weeks will not present unpleasant surprises, it will develop into faster growth of quotations of dollar.
The uptrend in the USD was strengthened by the fall under an important 1.1100 level, where previously EURUSD found support. On Thursday morning the pair is at the 1.1050, dropping to the lowest levels since may of 2017. Breaking the support line may give rise to increased pressure on the Euro, which can reach up to 1.04, region lows 2015-2016. The scrapping of the circular level at 1.1000 able to accelerate this weakening.
The increased purchases of dollar struck a new blow at the debasement. Today in the Asian session, GBPUSD came close to 1.210. Currently, the sterling is trading near the lows, which were reached only after a referendum on Brexit in 2016. Thus, the failure of 1.210 under the mark could start a new wave of triggering stop orders and lightly reduced. In light of this, on the Bank of England is a double responsibility in this meeting at the rate. Carney and his colleagues have very carefully chosen words so as not to cause uncontrolled lowering of the national currency, trying to speak and not especially tough, because it can bring down the stock markets.
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