25.06.2019: Another USD slump around corner? (USD, CAD)
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One of the catalysts for market sentiment remains the fact that the Federal Reserve acknowledged the need to lower interest rates.
The prospect of monetary easing was unveiled on Wednesday when the Federal Open Market Committee summed up its policy decisions. Today Fed’s Chairman Jerome Powell will give his first televised speech after the meeting at the Council on foreign relations in New York. The speech will be devoted to the economic outlook and monetary policy – the burning issues for investors.
Ahead of the comments from the Fed’s leader, the US dollar index is hovering at around 96.00, close to a three-month low. The US currency has lost a status of a safe haven asset. Thus, traders shift focus away from it even amid geopolitical tensions in the Middle East and a threat of a full-blown military campaign between the US and Iran.
On Monday, Donald Trump ordered new sanctions against Iran’s supreme leader and other top officials. In response, Iran’s president described the White House as “afflicted by mental retardation.” For his part, Donald Trump reminded that he does not need Congress’ approval to launch an air strike on Iran. Meanwhile, investors are on edge on the back of persistent jitters in the trade relations between the US and China. On Saturday, Donald Trump and Xi Jinping are likely to hold talks on the sidelines on the G20 summit. However, the parties will hardly settle the conflict.
Fresh macroeconomic data is not in favor of the US dollar. A batch of reports today confirms that the US economy is gradually slipping into recession. A survey from the Conference Board revealed that consumer confidence worsened in June. The index suddenly tumbled to 121.5, but economists had expected the index to dip to 132 points and hit a fresh high in half a year.
The housing market also unveiled negative trends. In May, new home sales sank by 7.8% which is the steepest slump since December. In a separate report, the house price index tumbled to the lowest level in seven years.
Versus the Canadian dollar, the greenback fell to the level of late April. The USD/CAD pair settled down at near the support level of 1.3160 ahead of the speech by the Fed’s leader.
If the Fed’s Chairman confirms the need to cut the key interest rate, this remark will knock down demand for the US dollar, thus deflating its value. Will Jerome Powell speak in favor of a rate cut? You will find out about it tomorrow on InstaForex TV channel. Subscribe to our channel and follow the latest news on financial markets. See you tomorrow!
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