Thursday, October 19, 2023 - Ahead of the Federal Reserve's monetary policy meeting, Governors Christopher Waller and John Williams have shared differing views. Waller, known for his hawkish stance, is closely monitoring the U.S. economy amidst ongoing discussions about interest rate hikes. Meanwhile, the dollar index has remained stable, bolstered by escalating U.S. Treasury yields due to concerns over government debt issuance and continuing rate deliberations.
IG Market Analyst Tony Sycamore noted the Fed's recent comments indicate a tightening financial environment and increased uncertainty due to Middle East geopolitical events. Policymakers at the Fed are hinting at a pause in rate hikes as they interpret mixed signals from strong economic data and persistent inflation.
The market now looks forward to Federal Reserve Chair Jerome Powell's upcoming speech, which is expected to echo the cautionary sentiments recently expressed by other Fed speakers.
In currency markets, the Japanese yen has slightly strengthened against the dollar, with currency strategist Carol Kong from the Commonwealth Bank of Australia (OTC:CMWAY) suggesting that if U.S. yields rise faster than Japanese yields, it could impact the dollar/yen pair and potentially trigger intervention from the Bank of Japan. This has already led to the Bank of Japan announcing $2 billion in emergency bond-buying to keep yields down.
Meanwhile, both the Australian dollar and sterling fell against the greenback to $0.6319 and $1.2137 respectively. The euro remained mostly flat against the dollar, while the New Zealand dollar fell nearly 0.2% at $0.5847.
On Wednesday, October 18th, amidst differing Federal Reserve stances and an escalating Hamas-Israel conflict, the U.S. dollar index increased slightly by 0.29 percent against six major currencies during late trading hours. The U.S. housing market demonstrated mixed signals in September with building permits decreasing but housing starts increasing, according to U.S. Census Bureau data. Simultaneously, the Office for National Statistics of the UK and European Commission reported that Britain's inflation rate held steady at 6.7%, and the eurozone CPI was at 4.3%.
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