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Dollar drops on Fed’s dovish rhetoric

The Fed is looking for ways to control interest rates as it reduces its reserves in the system while May is facing another fractious day in the Commons.

Centtrip: Measure twice, cut once?

The interest rate increase last December came with reluctance from some members of the Federal Reserve Open Market Committee (FOMC) , according to the minutes from the FOMC’s latest meeting.

Three members argued there was not enough inflationary pressure for a rise and suggested there should be more moderation and caution in the central bank’s rate policy this year. Atlanta Fed President Raphael Bostic said rates were about where they need to be and “a patient approach to monetary policy adjustments in the coming year is fully warranted”. The FOMC had previously suggested four rate hikes for 2019.

Bolstic’s comments put pressure on the Dollar, with the EUR/USD pair trading at a 12-week high as it reached 1.1567 overnight.

China is optimistic after three days of trade talks with the US “helped establish a foundation” to resolve existing tensions between the world’s largest economies. The Office of the US Trade Representative (USTR) said discussions focused on Beijing’s pledge to buy a substantial amount of agricultural, manufacturing, energy and other products from the US. Although little detail has been released, the positive sentiment boosted stock markets.

Meanwhile, Theresa May faced another setback in the House of Commons. The UK prime minister will have to present an alternative Brexit plan within three days if she loses the meaningful vote next Tuesday, 15 January. The amendment also increases chances of a second referendum.

Today, all eyes will be on the second day of the Brexit debate and the ongoing shutdown in the US.

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