- The Fed maintains stable rates, Powell indicates patience and dependence on the data.
- Markets undo rates clippage bets as the Fed moderates preventive relief.
- The aud/USD falls abruptly to 0.6430 after Powell denies moderate hopes.
The Australian dollar collapsed against the US dollar after the press conference of the president of the FED, Jerome Powell, where he emphasized the uncertainty around the perspectives of rates and ruled out the preventive relief. While the Fed maintained interest rates without changes in 4.5% as expected, Powell’s comments highlighted the need for more data and reaffirmed the patient posture of the Fed. He admitted that he could not determine with confidence the adequate trajectory of the fees and declared that the conditions do not support a rate cut.
The aud/USD torque, which had been around 0.6545 after the statement, fell sharply to 0.6430 as the operators reduced moderate bets and revalued the trajectory of the Fed. Powell’s comments arrested the previous fall of the dollar and triggered a new strength, particularly against risk -sensitive currencies such as Aussie.
Fed Faqs
The monetary policy of the United States is directed by the Federal Reserve (FED). The Fed has two mandates: to achieve prices stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the objective of 2% set by the Federal Reserve, it rises interest rates, increasing the costs of loans throughout the economy. This translates into a strengthening of the US dollar (USD), since it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to foster indebtedness, which weighs on the green ticket.
The Federal Reserve (FED) celebrates eight meetings per year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve officials of the Federal Reserve: the seven members of the Council of Governors, the president of the Bank of the Federal Reserve of New York and four of the eleven presidents of the regional banks of the Reserve, who exercise their positions for a year in a rotary form.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was the weapon chosen by the Fed during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy high quality bonds of financial institutions. The one usually weakens the US dollar.
The quantitative hardening (QT) is the inverse process to the QE, for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the bonds that it has in portfolio that they expire, to buy new bonds. It is usually positive for the value of the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
