Dollar Plummets in Forex Markets as Rate Cut on Horizon

The US dollar might not have to deal with a rate cut this week, but it’s looking likely that the Federal Reserve will make a significant decision to cut perhaps even next month.

The Fed last night announced that rates would stay at their current position of 2.5%, but it made a clear indication that there would be some stimulus to come in the next few months.

Some analysts are questioning whether or not the suggestion, which would pull the Fed into line with other institutions around the world such as the Reserve Bank of Australia, could even indicate a double-level rate cut.

This would see the standard rate change amount, 0.25%, doubled to 0.5%.

The dollar index, which assesses the currency in relation to six others, went down by 0.3%.

In its pair with the Japanese yen, the USD/JPY, the greenback saw half a percentage point wiped off its value. This represented its lowest point in this pair for six months – which indicates the extent to which this development is significant.

The foreign exchange trading week is starting to draw to a close, but the economic calendar for the next few days is packed.

Today (Thursday) the Bank of England will make its interest rate decision at 11am GMT. While the Bank is widely expected to hold interest rates firm at 0.75%, there may well be some indications that it will follow in the footsteps of other major economies and look to cut rates in the future.

A speech from the Bank’s Governor, Mark Carney, is scheduled for later in the day at 8pm GMT.

At 12.30pm GMT, continuing jobless claims from the US will be announced and are expected to show a downward shift of 7,000 or so. Initial jobless claims for last week are out at the same time, and they’re expected to show a drop of around 2,000.

Looking ahead to Friday, there’ll be a preliminary European Markit service purchasing managers’ index released at 8am GMT. This release, covering June, is forecast to show no change from its current position of 52.9.

The UK will be back in the spotlight at 8.30am GMT when public sector net borrowing for the month of May will be out at 8.30am GMT. This is predicted to report a slight rise.

The Bank of England’s quarterly bulletin for the second quarter of 2019 will be out at 12pm GMT and may hold even more clues about potential rate rises down the line.

Canadian retail sales data is expected out at 12.30pm GMT covering the month of April. Month on month, a change from 1.1% to 0.2% is expected.

Existing home sales data for the month of May is expected at 2pm GMT and is predicted to show a month on month change from 5,190,000 to 5,250,000.

The forex trading week will be rounded off by another significant central banker speech. The US Federal Reserve’s Lael Brainard, who sits on the Board of Governors, will speak at 4pm GMT.