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Dollar weakens on Fed’s dovish outlook

The Federal Reserve turns cautious and pledges to be patient with further interest rate increases.

Dollar weakens on Fed’s dovish outlook

The Dollar fell overnight against its peers as the Federal Reserve (Fed) took a dovish turn at its latest policy meeting.

The Euro returned to the 1.1500 level and the Pound gained 0.75 per cent, trading at 1.310 against the greenback.

The Fed kept the target interest rate range unchanged at 2.25–2.5 per cent as was widely expected. However, the US central bank discarded its plans for “further gradual increases”. Citing slower growth in major markets and heightened uncertainty around government policies, such as trade and Brexit, the Fed said it would be patient before making any further moves.

With trade becoming a growing concern for the US economy, investors will keep a keen eye on the second round of US-Chinese trade talks this week. Donald Trump will meet Chinese Vice-Premier Liu He in an attempt to apply pressure on Beijing to make concessions and to end the tariff war.

Today, Eurostat will release European GDP data. With growth and production figures slipping in Germany and France, if the release misses analysts’ expectations, it could cause increased volatility.

In Brexit news, Michel Barnier has said that the EU will not renegotiate the Northern Irish backstop, rejecting Theresa May’s request. Speaking at the European Parliament, the European chief negotiator added that the backstop was a “realistic solution” to preventing a hard border. UK Members of Parliament voted on Tuesday, 29 January to seek “alternative arrangements”, which do not seem forthcoming ahead of the 29 March Brexit deadline.

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