Treasury Pulse

Global Forex Market

THE dollar fell 0.54% to 97.117 after the Federal Reserve struck a dovish tone in its June policy statement while keeping its benchmark interest rates unchanged at 2.25%–2.50%. The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold. According to the FOMC statement, the Fed dropped the word “patient” in describing its approach to policy and tweaked its language from May’s statement to indicate that economic activity is “rising at a moderate rate”, a downgrade from “solid”. The economic projection also ticked down as officials slashed core PCE in 2019 and 2020, to 1.8% and 1.9%, respectively from 2.0% for both years. Besides, the dollar was also weighed down by disappointing economic release with June NY Empire State Manufacturing Index falling unexpectedly to 8.6 points from 17.8 points in May (cons: 10), marking the biggest drop in history and the lowest reading since October 2016. However, the downside risk for the dollar was partially cushioned by dovish ECB President Draghi’s comments, added with a slight improvement in the US-China trade sentiment after officials confirmed President Donald Trump and President Xi Jinping will meet at the G20 summit.