The US Dollar recorded gains, following yesterday’s announcement of a 25-basis point rate cut by the Fed. It Is counterintuitive that a rate cut is followed by a strengthening of the currency, but in this case the explanation lies in Jerome Powell’s speech, which followed the announcement.
The Chairman of the Federal Reserve started off by saying that the cut is only a mid-cycle adjustment, but left all options on the table, including further cuts but also the possibility of a new cycle of hikes. The confusion generated by these conflicting messages disappointed those expecting a more clearly dovish tone, offering support to the Dollar which is up almost 0.4% against a basket of other currencies during early Thursday trading.
Photo by Mel Poole.