The US dollar rises after the Fed's decision to cut interest rates: an analysis of reactions in global markets
The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday, as expected, and signaled that it will reduce borrowing costs significantly for the remainder of this year.
Fed Chairman Jerome Powell also called today's monetary policy action a reduction in risk management in response to the weakening of the labor market, but said that the central bank does not need to rush to ease monetary policy.
The impact of the decision on major currencies
DXY
The US dollar fell to its lowest level since February 2022 immediately after the interest rate decision, but rebounded strongly to rise by 0.44% during the day to the levels of 97.25 now.
The point chart of the monetary policy outlook also predicted additional cuts by an average of 50 basis points during the remaining two policy meetings of this year, but predicted only one additional cut in 2026.
The revised forecasts highlighted the degree of uncertainty that still surrounds the outlook, and the timing and scope of the expected interest rate cuts also indicate continued inflation risks.
EURUSD
The euro against the US dollar fell to the levels of 1.1790 USD, after hitting its highest level since June 2021 on Wednesday, in an emotional reaction to the Fed's announcement.
GBPUSD
The British pound also fell against the US dollar, and the Bank of England will announce its decision on monetary policy later on Thursday, and is expected to keep interest rates unchanged at 4%.
Official figures on Wednesday showed that the annual inflation rate in Britain reached 3.8% in August, reinforcing market expectations of the likelihood of further imminent interest rate cuts. Earlier this month, some analysts predicted another interest rate cut for the pound by the end of the year.
USDJPY
The yen is falling ahead of the Bank of Japan's interest rate decision on Friday, as the US dollar rose against the Japanese yen to reach 147.50 Japanese yen during Thursday's trading.
The Bank of Japan is widely expected to refrain from raising interest rates on Friday, but markets expect an increase of a quarter of a percentage point by the end of March, with a probability of about 50% for this to happen this year.
NZDUSD
The New Zealand dollar fell today to 0.5900 USD, which is its lowest level since the eighth of September.
Data on Thursday showed GDP fell by 0.9% in the second quarter compared to the previous quarter, a decline worse than analysts and the Reserve Bank of New Zealand forecast a decline of 0.3%.
The Reserve Bank of New Zealand is expected to cut interest next month by a quarter of a percentage point, with the rate also expected to be half a full point.
AUDUSD
The Australian dollar fell on Thursday to 0.6620 US dollars, after official figures showed net employment fell by 5,400 jobs in August on a monthly basis, compared with market expectations for an increase of 21,500 jobs.
USDCAD
The Canadian dollar pair rose on Thursday near the levels of 1.3799, after the Bank of Canada cut interest rates on Wednesday by a quarter of a percentage point to a three-year low as expected, citing a weakening labor market and reduced concern about underlying pressures on inflation.
