Dollar Declines in Forex Markets after Federal Reserve Takes Dovish View

James Randall

The US dollar was the major loser as forex markets got going on Thursday.

The dollar index, which measures the greenback’s value in comparison to several other major worldwide currencies, went down 0.43% overnight and then by another 0.1% this morning.

As of this morning, it sat at around 95.26.

This came as a result of the Federal Reserve’s announcement that it would not change interest rates in the US from their current position of 2.5% – a move which represents a significant turnaround.

Perhaps the most unsettling thing for forex traders was the commentary which came with the decision.

Despite many analysts spending 2018 expecting steady rises in US interest rates over the coming years, the Fed’s decision yesterday indicated that there was little chance of “further gradual increases”.

Elsewhere, the Australian dollar saw big gains as it went up 0.2% against the US dollar. The Aussie dollar reached $0.7264 in this pair following a huge gain of 1.3% on Wednesday.

The Canadian dollar made a modest gain of 0.1%.

The Japanese yen, meanwhile, also cleaned up in the face of the US dollar’s decline, gaining 0.15% compared to the day before.

As the trading week begins to draw to a close, there are still plenty of milestones to watch out for.

Canadian gross domestic product information is due out at 1.30pm GMT this afternoon (Thursday). It is expected that this will drop from 0.3% to -0.1%.

At 4pm GMT, meanwhile, the President of the German Bundesbank Dr Jens Weidmann will speak.

This will be followed at 5.30pm GMT by another central banker speech. This time it will be Carolyn A. Wilkins, who is the senior deputy governor of the Bank of Canada.

The day will be rounded off by a series of Japanese data releases. These will include the jobs/applicants ratio for December, which is expected to hold firm at 1.63.

December’s overall unemployment rate, meanwhile, is expected to drop from 2.5% to 2.4%.

Looking ahead to Friday, the French budget figures for December are due out at 7.45am GMT.

At 8.15am GMT, there’ll be a Swiss consumer price index release covering January. Year on year, this was last recorded at 0.7%.

Mortgage approvals data for January is due out of the UK at 9.30am GMT. While in the afternoon, nonfarm payrolls information for January will be published in the US at 1.30pm GMT.

This is expected to drop from 312,000 to 166,000.

At the same time, average hourly earnings for the US in January will be out. Year on year, these are expected to remain steady at 3.2%.

The overall US unemployment rate for January, will be out at the same time – and it is also expected to remain unchanged at 3.9%.

The last major release of this week will be the US manufacturing purchasing managers’ index for January published by the Institute for Supply Management.

This is forecast to reveal a drop from 54.3 to 54.2 when it is published at 3pm GMT.

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James Randall
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