U.S. Dollar Slumps on Dovish Fed Comments
The greenback slumped on Wednesday after dovish comments from Federal Reserve officials increased expectations that the central bank will pause its pace of interest rate hikes.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, fell 0.72% to 94.79 as of 10:20 AM ET (15:20 GMT).
Federal Reserve President Jon Bostic said at an event in Tennessee that the hike in December most likely increases rates to neutral and the Fed needs to be patient and get better insight on economic risks.
Investors are also looking ahead to the minutes from the Fed’s December meeting, which are released at 2:00 PM ET (19:00 GMT). Investors will peruse the notes for any indication of possible rate hikes in the coming year, especially after comments from Fed Chairman Jerome Powell last week, who said the central bank would rein in monetary policy if needed.
USD/CAD fell to a one-month low after the Bank of Canada decided to keep its benchmark interest rate unchanged, citing the current trade conflict between the U.S. and Canada and slowing global demand. USD/CAD slumped 0.5% to 1.3208.
Sterling was higher but still under pressure over Brexit. GBP/USD rose 0.60% to 1.2791. The future of Britain remains uncertain as the government is unlikely to get another deal if the draft bill fails, increasing the chances of a hard Brexit come March 29.