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RationalFX : US Dollar gains after Fed predicts quicker recovery

RationalFX : Sterling saw its biggest daily rise in two weeks but still remains under pressure due to ongoing Brexit risk.

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GBP

Furthermore, the Bank of England is widely expected to hold fire, policymakers are likely to conclude that downside risks to the economy are rising due to growing Brexit uncertainty and renewed restrictions on social activity.

USD

The US Dollar gained on Wednesday after the Federal Reserve announced interest rates will remain unchanged near zero. The FED said it expects the US economy to recover quicker than expected from the coronavirus crisis as unemployment fell faster than the central bank expected in June.

The US central bank is likely to keep interest rates unchanged until the inflation target of 2% is achieved. New economic projections now see the FED predicting a 3.7% drop in growth as opposed to 6.5% in which they previously forecasted. The US economy contracted by more than 9% in April and June but the central bank are now predicting a better ending to the last quarter of the year.

FED chair Jerome Powell describes steps taken by the central bank as ‘powerful’ and ‘highly accommodating’ by keeping interest rates at record lows and supporting borrowing with ongoing bond purchases.

Key announcements

12:00 – GBP – MPC Official bank rate votes – Forecast 0-0-9 from previous 0-0-9

12:00 – GBP – Official bank rate – expected to be unchanged at 0.10%

12:00 – Monetary policy summary

Source : ETFWorld.co.uk

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