Dollar Drops On Fed Rate Cut Hopes
March 02 2020 - 4:55AM
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The U.S. dollar came under pressure against its most major
rivals in the European trading session on Monday, as investors are
pricing in a Fed rate cut at March policy meeting to contain the
economic fallout from the virus outbreak.
Expectations of a rate cut intensified following Fed Chairman
Jerome Powell's statement that the central bank would "act as
appropriate" to support the economy.
"The coronavirus poses evolving risks to economic activity. The
Federal Reserve is closely monitoring developments and their
implications for the economic outlook. We will use our tools and
act as appropriate to support the economy," Powell said on
Friday.
The market is now pricing in a rate cut at the next Fed meeting
on March 18.
Investors cheered indications from other global central banks to
support their economies in response to the coronavirus scare.
The Bank of Japan signaled today that it will make every effort
to ensure stability in financial markets roiled by the coronavirus
outbreak.
The Bank of England said it would take all necessary steps to
maintain market stability.
The greenback fell to 1.1165 against the euro, its weakest since
January 16. The currency is poised to challenge support around the
1.13 mark.
Final survey data from IHS Markit showed that Eurozone
manufacturing activity contracted only marginally and at the
slowest pace for the past year in February.
The factory Purchasing Managers' Index rose to 49.2 in February
from 47.9 in January. This was slightly above the flash score of
49.1.
The greenback dropped back to 107.52 against the yen, not far
from near a 5-month low of 107.36 seen in the Asian session. The
greenback is seen finding support around the 106.00 mark.
Bank of Japan Governor Haruhiko Kuroda said the bank will ensure
stability in the financial markets via asset purchases.
"The Bank of Japan will closely monitor future developments, and
will strive to provide ample liquidity and ensure stability in
financial markets through appropriate market operations and asset
purchases," he said in a statement.
The greenback declined to 0.9546 against the franc, a level
unseen since September 2018. Next key support for the greenback is
likely seen around the 0.94 level.
The greenback edged down to 0.6279 against the kiwi and 0.6568
against the aussie and held steady thereafter. The greenback is
likely to face support around 0.645 against the kiwi and 0.70
against the aussie.
In contrast, the greenback rose to 1.2746 against the pound from
last week's closing value of 1.2823. The next possible resistance
for the greenback is seen around the 1.24 level.
Survey data from IHS Markit showed that the UK manufacturing
sector expanded at the fastest pace in ten months in February as
domestic demand continued to recover on the back of reduced
political uncertainty.
The IHS Markit/Chartered Institute of Procurement & Supply
Purchasing Managers' Index rose to 51.7 in February from 50.0 in
January. However, this was below the earlier flash estimate of
51.9.
The greenback recovered to 1.3390 against the loonie, from a
5-day low of 1.3315 hit at 3:30 am ET. The currency is likely to
face resistance around the 1.35 region, if it gains again.
The U.S. ISM manufacturing index for February and construction
spending for January are set for release in the New York
session.
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