US dollar weakens on Fed comments

US dollar exchange rates have fallen this afternoon, particularly against the Euro to bring rates below 1.15 for the first time in nearly three months.

Movements have been attributed to comments made by Federal Reserve president Raphael Bostic who suggested the Fed may only look to raise interest rates once throughout the course of 2019. He mentioned his view was driven by conversations with business executives who have become more defensive in anticipation of slower growth.

What does this mean for the dollar?

With previous forecasts and analysts suggesting a up to two or three hikes in 2019 the market appetite for the US dollar appears to be waning and this could see a sustained period of US dollar weakness. There has been a sudden shift in market confidence in the US with the stock market showing recent heavy losses and market confidence, particularly surrounding economic growth, beginning to fall. This means the recent period of US dollar strength could be coming to an end, particularly against the Euro.

As a direct result of the US dollar weakness we have also seen the Euro rally against the Pound. This can be typical as they often have a direct correlation. With USD/EUR trades accounting for over 70% of market flows, big moves for EUR/USD will often mean subsequent movements for EUR/GBP. This trend has happened this afternoon with the EUR/GBP rate reaching 0.9036

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