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Central Bank Weekly Talking Points:

  • Fed Chair Powell said that “uncertainties since [the] June FOMC[1] continue to dim [the economic] outlook,” a not-so-subtle hint that the US-China trade war is hurting the economy. In turn, the Federal Reserve will respond as expected for a central bank in its position by cutting interest rates.
  • Fed funds futures are close to discounting three 25-bps rate cuts by June 2020; after the June US jobs report, rates markets were pricing in just over two rate cuts.
  • Retail traders[2] continue to buy the US Dollar despite evidence of major topping potential[3].

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides[4].

Federal Reserve Chair Jerome Powell is on Capitol Hill on Wednesday and Thursday giving his semi-annual testimony to Congress. Kicking off in the House of Representatives in front of the House Financial Services Committee today, Fed Chair Powell laid the groundwork for a series of interest rate cuts over the coming months. Saying that “uncertainties since [the] June FOMC continue to dim [the economic] outlook,” it’s clear that a lack of progress in the US-China trade war talks is about to provoke Fed Chair Powell and the FOMC into a formal shift in monetary policy.

Fed Response to US-China Trade War is Expected

In an earlier update, we reviewed the different methods that the various major central banks could respond to the growing threat of trade wars. “For central banks like the Federal Reserve or European Central Bank, there is too

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