The Fed’s outlook on interest rate hikes is being closely followed this morning as the dollar falls against the euro. The chaos in the U.K. Thursday has calmed, allowing the pound to edge slightly higher.
Federal Reserve Chairman Jerome Powell cleared the path for a possible interest rate hike pause in 2019.
Speaking at an economic forum at the Dallas Federal Reserve, Powell pointed to slowing demand abroad, a lacking fiscal stimulus domestically, and the lagging impact of the Fed’s past interest rate increases as challenges to growth.
The commentary has investors wondering if the Fed will stick to its September outlook of three interest rate increases of a quarter point each in 2019.
The dollar was lower against its major peers Friday morning on the news. The EUR/USD pair jumped from 1.132 to 1.140 as Dallas Fed President Robert Kaplan echoed Powell’s sentiment on headwinds.
The Fed is expected to raise interest rates at its December meeting and Powell did nothing to dispel that assumption in the markets.
Pound still breathing
After a tumultuous day Thursday, the pound is showing signs of life Friday morning as a weaker dollar allows for a slight sterling advancement.
Sterling hit as low as 1.273 Thursday and is climbing up to 1.287 this morning.
Prime Minister Theresa May was defiant in her address last night that she would remain as leader and see Brexit through to the end.
Although there have been calls for a vote of no confidence in May, no official parliamentary motion has been made.
Don’t hold your breath
Global equities took a tumbles as it became clear that a de-escalation in the U.S.-China trade war isn’t coming anytime soon.
Earlier this week there were hops that U.S. and Chinese officials could make some headway before President Trump and President Xi Jinping meet on the sidelines of the G20 summit at the end of the month.
However, U.S. Commerce Secretary Wilbur Ross is now saying the U.S. will still raise tariffs against China in January.
Ross also added that Trump and Xi would just determine a “framework” for future talks.