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US Dollar Mixed on Better-Than-Expected Industrial, Manufacturing Output

September 17, 2019 at 19:26 by Andrew Moran

US dollar banknotes and coinsThe US dollar is mixed against several major currency rivals on Tuesday after the latest industrial and manufacturing output numbers were published. But global financial markets are bracing for the Federal Reserve’s decision on interest rates, which the market is now split on. In the backdrop is low-level US-China trade discussions restarting later this week.

On Wednesday, the Federal Open Market Committee (FOMC) will complete its two-day policy meeting for September. For weeks, it was widely expected that the central bank would pull the trigger on a rate cut, mainly because of disappointing jobs numbers, weakness in areas of the economy, and pushes by the White House. However, fed fund traders are split right down the middle after betting on a rate cut for weeks.

According to the CME Group FedWatch tool, there is a 50–50 chance of a rate cut. This is down from as high as 98% just last week. Investors now expect a rate reduction during the boom phase of the business cycle to happen in October: 50% say a quarter-point cut and 21% forecast a 50-basis-point decrease. There is also speculation that the Fed will quietly launch a fourth round of quantitative easing after purchasing billions in Treasurys.

President Donald Trump has been encouraging the Eccles Building to cut rates to as low as zero and beyond. He has asserted for weeks that the rest of the world is making a fool of the Fed as they all bring rates lower and debase their currency to make exports more competitive. The Fed has repeatedly dismissed the idea that it is heeding the White House’s advice.

The Fed reported on Tuesday that industrial output climbed 0.6% in August, up from a 0.1% decline in July. This represents the largest industrial gain since August 2018. Manufacturing output advanced 0.5% last month, up from 0.4% dip in July. Capacity utilization rose to 77.8% in August, up from 77.52% in July.

Investors will now turn to housing data on Wednesday, which will inevitably be overshadowed by the Fed interest rate decision and FOMC economic projections.

The US Dollar Index tumbled 0.34% to 98.27, from an opening of 98.65.

The USD/CAD currency pair rose 0.07% to 1.3252, from an opening of 1.3242, at 19:14 GMT on Tuesday. The EUR/USD surged 0.57% to 1.1069, from an opening of 1.1001.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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