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Dollar Extends Post-Fed Gains

Dollar Extends Post-Fed Gains

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Erik Holm - Head of media

The US dollar is rising to a basket of major world currencies during the Asian session on Thursday after the Federal Reserve System (FRS) made it clear that lowering the base interest rate is not the beginning of a cycle of easing monetary policy.

According to the results of the July meeting, the Fed lowered the interest rate on federal credit funds by 0.25 percentage points to 2-2.25% per annum. The reduction was the first since 2008 and coincided with the forecasts of analysts and market participants. At the same time, the head of the Federal Reserve Jerome Powell made it clear that the action of the Central Bank is not the beginning of a cycle of easing monetary policy. Earlier, most experts expected another decrease in the cost of lending before the end of this year.

However, despite the stated readiness for action, it was completely unlikely that the Fed really seeks to actively soften the policy. As a result, the Bank’s verdict turned out to be less pigeon than the markets expected. Accordingly, after its release, EUR / USD immediately fell to the 1.11 mark and updated the 26-month low in the region of 1.1085, and the dollar index bounced to the maximum since May 2017 at 98.40. The probability of a Fed rate cut in September was revised by markets from 78% to 68.5%.