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US Dollar Weakens as Euro Gains Momentum Following Federal Reserve Chair’s Cautious Comments

US Dollar Index Slips as Fed Chair Signals Steady Interest Rates

US Dollar Declines Amid Fed Chair’s Cautious Remarks

The US Dollar Index experienced a 0.33% decrease on Thursday, October 19, 2023. This decline followed Federal Reserve Chair Powell’s indication of maintaining interest rates steady at the forthcoming Federal Open Market Committee (FOMC) meeting. Powell’s cautious stance towards additional policy firming weighed on the dollar, leading to its decline. However, the decline was mitigated by the 10-year Treasury note yield reaching a 16-year peak and weak stock performance, which spurred demand for dollar liquidity.

Mixed Economic News Influences Currency Market

The currency market was also influenced by mixed U.S. economic news. September’s existing home sales, leading indicators, and Philadelphia Fed business outlook survey results showed declines. However, weekly unemployment claims decreased, suggesting a strengthening labor market.

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Euro Rises in Response to Powell’s Comments

Powell’s slightly dovish comments had a positive impact on the euro, which saw a 0.47% rise. However, the dollar was negatively affected by a dip in French business confidence.

Yen Recovers from Two-Week Low

The Japanese yen recovered from a two-week low against the dollar. This recovery was driven by the Bank of Japan’s quarterly report, which upgraded economic assessments for six out of nine areas in Japan. Additionally, a decade high in the Japanese Government Bond yield contributed to the yen’s recovery.

Precious Metals Show Inconsistency

The prices of precious metals showed inconsistency. December gold reached a 2-1/2 month high due to a weak dollar, an increase in the 10-year U.S. breakeven inflation rate, and safe-haven demand spurred by the Israeli-Hamas conflict. Conversely, December silver closed lower.

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This article provides an overview of the US Dollar Index’s decline following Federal Reserve Chair Powell’s indication of maintaining steady interest rates. It also highlights the influence of mixed U.S. economic news on the currency market, as well as the rise of the euro and the recovery of the yen. The article concludes with insights into the performance of precious metals.

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