Dollar digests Powell’s ‘dovish’ message The greenback continues to bleed nearly across the board, digesting the unexpectedly “dovish” tone from Pow-ell. The Fed Governor stated that rates were just below neutral range and didn’t mention a future 'gradual path of rate hikes for next year. Such rhetoric made traders worry about the potential pausing hikes in 2019. As a result, the dollar came under aggressive selling pressure which has partially abated in mid-morning trading on Thurs-day.
The message from Powell implies that the buck could lose a strong bullish driver – the monetary policy diver-gence. At the same time, a more measured approach by the Federal Reserve bodes well for riskier assets. But in the short term only. By changing its tone, the Fed admits that the global economy is really cooling and a more substantial slowdown could be in the cards. In this environment, other major central banks may not find solid grounds for hiking rates as well. So, in the longer term, a more cautious stance by the US regulator won’t have a dramatic impact on the buck.
For now, USD will likely remain under some pressure until the dust settles. By the way, negative Brexit devel-opments could help the dollar to recover. After the recent rally, cable clipped below 1.28 as sterling failed to keep the upside momentum ahead of meaningful vote. Further selling pressure from this front may ease the negative sentiment surrounding the greenback.
