The dollar fell to a three month low againt other major currencies yesterday

The dollar fell to a three month low againt other major currencies yesterday

The dollar fell to a three-month low against other major currencies yesterday after the Fed defended policy, as expected. The Fed continues to maintain interest rates in the range of 0.00-0.25% and continues its asset purchase program to stabilize the economy which has been hit by the corona virus. The Fed also did not announce any steps to limit the increase in bond yields, as some analysts had predicted. The Fed promised to support the economy and projected GDP would contract by 6.5% and the unemployment rate would be at 9.3% by the end of this year. But the Fed predicts that the economy will expand 5% next year and in 2022 it will grow 3.5%. The dollar index weakened 0.4% to 95.882.

The pound strengthened to the highest level 3 months after the FOMC meeting which weakened the US dollar. Pounsterling also got a breath of fresh air after the EU and British negotiators committed to negotiating effectively until the end of the year. This has reduced Brexit fears that continue to haunt. With the reduction in Brexit worries, sterling also strengthened over the euro.

The price of US gold futures strengthened around 0.33% yesterday after the Fed maintained its policy and said that there was no increase in interest rates until 2022. In his statement, the Fed repeated its statement that it was ready and committed to using all policy tools to support the economy. The Fed noted that financial conditions are improving, but projecting a difficult future for the US economy, despite the strong numbers of workers last month.

Oil prices rose yesterday following the weakening dollar after the FOMC meeting announced that it would set low interest rates until 2022. The Fed's policy was taken to support the economy, easing concerns about energy demand. The Fed's policy is able to offset data from the EIA that shows US oil reserves have increased. In its report the EIA said US oil reserves rose by 5.7 million barrels, against an estimated decline of 1.8 million barrels. Earlier in the day, the American Petroleum Institute (API) reported US oil reserves rose by 8.42 million barrels, which caused oil prices to fall after a rally in several days. Prices were also depressed due to news that said that US shale producers had resumed operations. In addition, there are fears that some countries in the Middle East, especially Iraq, will continue to produce oil, ignoring the agreement on output cuts that have been made.

Asian stocks are vulnerable to a correction today after a gloomy economic outlook from the Fed in the results of the FOMC meeting, which delivered the dollar, and stocks on Wall Street weakened. At its meeting yesterday, the Fed predicted the economy would contract 6.5%. The Fed also kept interest rates low until 2020. The Nikkei futures index fell 1.2%.

Today's Focus: PPI and US Jobless Claims

Not so many events or economic data are present today, only some data that are medium impact. Even so, the data is still worth listening to, especially the US inflation data, because the data will be related to the direction of the Fed's policy. The US PPI is expected to grow 0.1% in May, after contracting 0.3% in April. Other data are jobless claims, which are estimated to rise by 1,550 thousand.

[About The Author]

Fanny has started her self-learning of Forex since 2005 and has joined an Indonesian broker as a financial consultant in 2009. Through “trial and error”, she has learnt a lot from failure experiences. She is now a renowned trainers for the forex beginners and has helped the clients to get the profits from trade.

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