The Dollar is marginally weaker today, at the bottom of a 2% range in place since mid-August, following Federal Reserve Chairperson Powell’s speech last night.
Powell announced the potential for a tactical quantitative easing program involving the purchased of T-bills and unsurprisingly short-end yields dropped but he made clear this would not be repeat of the Fed’s post-financial crisis large-scale QE program. He painted a reasonably positive picture of the US economy, including the strength of consumer demand and sustainable US growth. But he also once again flagged
geopolitical risks, that the Fed was not a pre-set course and that future policy decisions remained data-dependent.
US PPI-inflation was weak in September and markets will now be turning their attention to the release of the Fed’s policy meeting minutes later today and CPI-inflation data due out tomorrow. Markets are pricing in 39.5bp of Fed rate cuts between now and year-end, implying one more 25bp cut and a 60% probability of another 25bp cut by end-2019.
