2nd May 2019 - The Fed's resilience sent the Greenback higher

Walid Salah Eldin

Master Trader
Feb 15, 2016
The Fed's resilience against Trump's administration argument for cutting the interest rate could boost the greenback across the broad sending the UST yields up and Gold down amid lower risk appetite.

The Fed seemed to the markets yesterday having no will to change its adopted patience stance meanwhile shrugging off the increasing expectations of having interest rate cut by the end of this year.

The Fed has seen that the US economy is slowing down but it is still strong and it has no worries about it to figure it out in its economic assessment.

The Fed's chief looked more optimistic than expected by telling during his press conference following the FOMC meeting that the signs of global economic weakness that prompted concern in March had partly subsided.

"March" when the Fed lowered its growth and inflation forecasts and expected no interest rate hike this year.

The Fed appreciated also the current lower inflation pressure, but it was also optimistic about its outlook proposing that likely to be "transitory".

It has maintained its consideration of the labor market continued improvement which is still pushing up the labor costs and building up wages inflation pressure.

The Fed's chief underscored yesterday The Fed's strong commitment to its 2% yearly inflation goal expecting the inflation to rise eventually over time and if it is to persist below this target, The Fed is to address about it.

The Fed's chief Jerome H. Powell tried to be more obvious about the Fed's current stance by telling that We don’t see a strong case for moving in either direction.

The conclusion we have got yesterday from that meeting that the Fed is still courageous enough to refrain from cutting rates or sending signal about coming cutting rates, despite Trump's demands, the equities markets participants' speculations, the weaker pace of economic expansion and lower inflation rates.

The Fed's assessment came yesterday, after PCE core figure which is the Fed's favorite inflation barometer has shown in the beginning of this week yearly rising in March by only 1.6% scoring its weakest rate or rising since February 2018.

After US GDP figure released last Friday to show annual growth rate by 3.2% in the first quarter beating the median forecast which was referring to only 2% expansion, following growth by 2.2% in the last quarter of last year.

Have a good day

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din