Fed's decision and dollar reaction, the CB of Japan and England

19 Sep 2019

Fed Decision: Interest rates cut by 25 basis points after FOMC meeting.
The Federal Open Market Committee decided to lower the rate to 0,25%.

FOMC does not have a fixed position: some members believe in further reduction, other members voted against any further reduction at this meeting. So could observe the lack of dollar sales.

Different positions are understandable. In the last couple of weeks, the US economy has shown good outcome, so the Fed may well take a break in easing cycle.

As for the USA. Statistics on the real estate market in the United States were published yesterday. The figures came out more than good. So, the start of construction indicator increased by 12.3% m/m (forecasts + 5%), and building permits in August grew by 7.7% m/m (analysts expected an average decrease of 1.3%).

In general, talking about a downtrend in the dollar is premature, and even a correction in the dollar value is in question. However, today we will continue to look for points for selling the dollar.

Today, the Bank of Japan has traditionally left monetary policy parameters unchanged. The Bank of Switzerland is also expected to leave the rate unchanged. However, both of these Central Banks are pursuing an ultra-soft monetary policy, there is simply nowhere to lower rates.

The Bank of Japan has not yet held a press conference following the meeting when we were completing news background. If there are no surprises, then our position is to buy the Japanese yen today. First of all, against the dollar and the euro.

The pound was under pressure yesterday. This was due to both statements by the EU that the risk of exit without a deal and macroeconomic statistics from the UK. Consumer inflation came out below per cent. Weak inflation on the eve of the Bank of England decision announcement on the parameters of monetary policy is a sign for pound sellers activation. Total up to the verdict announcement we prefer to stay away from pound positions. Moreover, before that, data on retail sales in the UK will be published. Since the Bank of England will announce the decision today, we will present our adjusted position on the pound tomorrow.

In the end, the pound is not the only instrument for trading. Gold purchases from local lows continue to be relevant. As well as oil sales from local highs. The situation with Saudi Arabia seems to have stabilized and markets generally calmed down.