The value of the US has generally been increasing through the year however the tone for the dollar has recently started to change.
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The change all stems from central interest rates set by the Federal Reserve Bank (FED), and the forecast for when changes may come through-out the year. At the end of 2018 US interest rates were increased to 2.25%, which overtook Australia and other developed countries resulting in demand for the currency increasing as investors looks for the best returns. At that time, US growth was very strong and there was a view that rates could well continue to climb through 2019. As the year has developed, and with US-China trade talks destabilising global trade, and US growth has started to wain resulting in most forecasts suggesting interest rates were going to remain unchanged through 2019. This increased strain between the President of the US and the FED, who are supposed to stay impartial, with different views on future interest rate.
Last week the chairman of the US federal Reserve, Jerome Powell, said that the FED will “act as appropriate to sustain the expansion” of the economy as it monitors the impact of the trade war. This was a real change in tone from the FED to a more dovish viewpoint, suggesting that the they may need to cut US interest rates. Many now expect a 25-base point cut in rates before the end of the year as the FED's own economic forecast suggests the momentum in US growth starts to wain and tensions mount about global trade tensions as the list of who and what has a trade tariff on it continues to grow.
The next FED rate meeting is a week away on Wednesday, and will be very closely watched for clues about where policy and importantly when economic policy may be changed.
The latest set of US job creation data, released showed a slow down in momentum for the US which was against the expectation. The overall unemployment rate remained at a 50-year low of 3.6%, it is more about the change in projected improvement or slow-down that the market could price into the value of the US dollar.
Tomorrow, economic data released from the US includes Retail figures, industrial production and consumer sentiment. Retail figures are currently expected to show an improvement along with industrial productivity, however consumer confidence could well start to fall because of trade talks and trade tariffs continuing to be introduced by President Trump.
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