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US Dollar Strengthens As Federal Reserve Leaves Interest Rates Unchanged

December 11, 2019 at 19:07 by Andrew Moran

A rolled dollar bill with some banknotes on the backgroundThe US dollar is strengthening against most major currency rivals midweek as the Federal Reserve left interest rates unchanged amid a strong national economy. The greenback is also reacting to higher price inflation and a robust housing market.

On Wednesday, the Federal Reserve announced that it is leaving interest rates unchanged at a target range of 1.50% and 1.75%. The market widely anticipated that the Fed would not cut rates, especially following last week’s impressive November jobs report. The announcement came after concluding the central bank’s final Federal Open Market Committee (FOMC) meeting for 2019. In the end, the central bank cut rates three times this year.

In its December policy statement, the Fed signaled no changes to rates in 2020. Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.

The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

On the data front, the consumer price index (CPI) rose 0.3% in November, lifting the 12-month inflation rate to 2.1%. This is the highest level the cost of living has been since November 2018 as households paid more for energy, health care, and rent. The market had anticipated a 0.2% gain.

According to the Mortgage Bankers Association (MBA), mortgage applications climbed 3.8% in the week ending December 6. This is up from the 9.2% contraction in the previous week. The 30-year mortgage rate also edged up 0.1% to 3.98% for the week ending December 6.

Financial markets now look ahead to producer prices and jobless claims on Thursday, as well as retail sales and import-export prices on Friday.

The USD/CAD currency pair fell 0.32% to 1.3189, from an opening of 1.3231, at 18:02 GMT on Wednesday. The EUR/USD advanced 0.05% to 1.1100, from an opening of 1.1093.

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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