The dollar becomes vulnerable after the latest reduction by the Fed – ING

The Fed cut interest rates by 50bps yesterday, which surprised economists’ consensus rather than markets, which had priced in about a 65% chance of a half-point move. There has also been a substantial revision in Dot Plot projections, notes Francesco Pesole, ING’s FX strategist.

The FOMC caused volatility in the forex market

“Initial FX market reaction was broadly negative for the USD, with the Yen (JPY), Norwegian Krone (NOK) and New Zealand Dollar (NZD) rising around 1% and the Canadian Dollar (CAD) unsurprisingly flat. other G10 currencies. By the time Powell’s conference ended, those moves had been completely reversed.

“We continued to see higher currency volatility in the Asian session. After a brief overnight rally in the USD, we are largely back to pre-G10 announcement levels, with only the JPY standing out as moderately weaker and the AUD moderately stronger following robust numbers from the work from Australia.

“Finally, we see more room for markets to build speculative USD shorts in the US election, especially as the negative USD candidate (Kamala Harris) continues to do quite well in the post-debate polls .”