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Fed minutes have little impact

Published August 22, 2019

Author: Brett Gordon

The AUD rallied during early trading yesterday, touching the 0.68 level. That’s an area that has been significant resistance of late, and now we have to wonder what the Federal Reserve is going to do next. As mentioned yesterday , until such time the US and China come to some sort of agreement we may not see the AUD gain for sometime.

The minutes from the latest US Fed rate decision meeting showed varying views on whether to cut and by how much.  There was debate on cutting interest rates more aggressively, although there was consensus on not wanting to appear to be starting a more aggressive easing cycle.  Rates were cut by 0.25%, but there were a couple of dissenters, and a couple more members were in favour of a 0.50% cut.  The minutes appear consistent with Chairman Powell’s view that the move was a “mid-cycle adjustment”.  All eyes will now be on Powell’s speech at the Jackson Hole Symposium early morning on Saturday.

President Trump said that his administration is looking at possible tax cuts, dismissing warnings about the US recession threat.  He also reiterated that the Federal Reserve needs to be proactive and should cut interest rates by at least 100 basis points to lift the economy.  Trump’s twitter account was also busy sending out messages directed at the Fed saying “highest dollar in US history. No Inflation. Wake Up Federal Reserve”.  Meanwhile, Federal Reserve Bank of San Francisco President Mary Daly said that the US economy does not appear to be headed toward a recession and that the Fed was right to lower rates in July as it sought to keep the economy on a path of growth.

From a data front not much locally but look out for manufacturing data for both the U.S and Euro Zone released tonight, with expectations for further declines in these numbers from the previous month.