How Will Fed’s Rate Cut Affect Forex Market in November

Coming to November, a series of major global events such as ECB President Draghi‘s farewell speech, the Fed’s 3rd interest rate cut in the year and the general sluggish trend in global manufacturing continues to stir up the forex market. Here‘s a quick look at what’s going on recently that may affect the forex trend.

Draghi made his farewell speech

In the evening of October 24th (GMT+8), European Central Bank (ECB) President Mario Draghi spoke at his last press conference as the central banks leader after the policy meeting, while ECB decided to keep 3 key interest rates unchanged, in line with the market expectation. In addition, ECB also reiterates its plan to resume monthly bond-purchase of €20 billion, starting from November 1st, saying that the bond-purchase will carry on until the next interest rate increase, as long as the bank sees it necessary.

After the decision was announced, Draghi noted at the press conference that according to latest statistics, Eurozone economy remains weak on the long run with significant down-slope risks, and inflation may continue to decline. Draghi said the ECB may need to maintain large degree of quantitative easing for a longer period and be ready to adjust the policy tools accordingly. Advocating for a gradual expansion approach in financial policy, he also calls for the governments of EU members with more fiscal space to take actions and accelerate economic reform.

The Fed is expected to cut interest rate for the 3rd time this year

US president Donald Trump voiced disappointment about the Federal Reserves monetary policy on October 24th in a tweet, implying the Fed is too slow in cutting interest rates. As weakening economic indicators recently confirmed US economy is struggling with inadequate investment, the market had expected FOMC to lower the target range of interest rate by 1.5% to 1.75, and the prophesy has been proved as the Fed decided to cut rates once again after much deliberation, in order to tackle the current economic challenges.

A sluggish global manufacturing sector

US is not alone, as the whole world faces the challenge of economic slowdown. The Purchasing Managers‘ Index (PMI) indicates sluggish manufacturing across the globe. Japan’s PMI registered the largest decline in 3 years, falling for 5 months in a row, while Australia‘s PMI dropped to a record low to just above 50. In the Eurozone, PMI for France also dropped while Germany’s only recovered slightly from a decades low in last month.

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