The Federal Reserve cut interest rates by 0.25% to 2.00%, in line with consensus forecasts..

The Federal Reserve cut interest rates by 0.25% to 2.00%, in line with consensus forecasts, but there were 3 dissenters. Rate projections suggested no further cuts for 2019, although 7 committee members did project a further reduction.

The dollar posted net gains following the slightly more hawkish than expected Fed tone. Short-term US yields increased, although longer-term rates were little changed.

US equities recovered initial losses as risk appetite held steady with limited net global gains. The Bank of Japan held policy steady and USD/JPY retreated sharply from 7-week highs near 108.50.

Oil prices registered slight losses as the US tightened financial sanctions on Iran rather than opting for a short-term military response.

Precious metals declined following the Fed decision with gold below $1,500 per ounce. Commodity currencies lost ground with mixed jobs data undermining the Australian dollar.

The Federal Reserve cut interest rates by 0.25% to 2.00% which was in line with consensus forecasts. Rosengren and George dissented as they wanted to leave rates at 2.25% while Bullard also dissented as he wanted a deeper 0.50% cut.

The UK headline CPI inflation rate declined to 1.7% for August from 2.1% previously and below consensus expectations of 1.8% while the core rate declined to 1.5% from 1.9% which was below expectations of 1.7% and the lowest rate since the end of 2016. Sterling dipped lower with expectations of a relatively dovish bank stance at Thursday’s meeting.

EU chief negotiator Barnier stated that there should not be pretend Brexit talks and called for legally-robust solutions while Commission President Juncker warned over the risks of a ‘no-deal’ as underlying tensions increased.

GBP/USD retreated from highs just above 1.2500 as the dollar strengthened following the Fed decision, but Northern Ireland DUP leader Foster stated that the party was prepared to be flexible which supported sentiment and GBP/EUR retreated to near 1.1280. Some EU governments demanded solid UK Brexit proposals within two weeks and GBP/USD was held below 1.2500 with EUR/GBP rallying to just above 1.1280.

Economic Calendar

Expected Previous
07:00 CHF Trade Balance(AUG) 3.220B 3.686B
07:30 BoJ Press Conference - -
08:30 CHF SNB Interest Rate Decision -0.75% -0.75%
08:30 SNB Monetary Policy Assessment (Q/Q)
09:30 GBP Retail Sales ex-Fuel (M/M)(AUG) -0.20% -0.20%
09:30 GBP Retail Sales ex-Fuel (Y/Y)(AUG) 2.30% 2.90%
09:30 GBP Retail Sales (Y/Y)(AUG) - 3.30%
09:30 GBP Retail Sales (M/M)(AUG) -0.20% 0.20%
11:00 ECB Benoit Coeure Speaks - -
12:00 BOE MPC Vote Unchanged(SEP) 9 9
12:00 BOE MPC Vote Hike(SEP) - 0
12:00 BOE MPC Vote Cut(SEP 01) - 0
12:00 BoE QE Purchase Target(M/M)(SEP) 435B 435B
12:00 BoE Rate Decision(M/M)(SEP) 0.75% 0.75%
13:30 USD Current Account Balance -125.0B -130.4B
13:30 USD Philadelphia Fed. Manufacturing Index(SEP) 10 16.8
13:30 USD Continuing Jobless Claims 1.672K 1.670K
13:30 USD Initial Jobless Claims 213K 204K
15:00 USD Existing Home Sales(SEP) 5.39M 5.42M
15:00 USD Existing Home Sales Change(SEP) 2.50% 2.50%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.