Long expected US Federal Reserve’s October Policy Meeting

Long expected US Federal Reserve’s October Policy Meeting
 
The Federal Reserve (FED) is the central bank for the US. Every year, the FED typically holds eight meetings with about seven weeks apart to discuss its monetary policies and decide on their interest rates, followed by a statement from them regarding their prospect towards the economy. On the same day, a press conference led by the current FED’s Chairperson can also be expected to discuss their monetary policy stance and their plans to support the economy.
 
On Wednesday at 2.00 pm Eastern Time (ET), the FED held their 2nd last policy meeting for this year, with the press conference at 2.30 pm ET led by FED’s Chairman, Jerome Powell. During their meeting, the FED had decided to lower their interest rates by 25-basis point from a previous range of 1.75% – 2.00% to 1.50% – 1.75%. The reasoning behind the rate cut was to sustain economic activity expansion, improving labor market conditions, and most importantly, boosting inflation near its 2% objectives.

The rate cut initially supported investors’ risk appetite, causing them to sell their safe-haven assets while entering into the dollar market. As the rate cut was already highly expected, investors were placing their bets on positive comments during FED’s Press Conference. However, during the conference, Chairman Powell deliver a somewhat dovish speech as compared to FED’s September policy meeting.

Powell addressed that the economy is still facing risks arising from global growth weakening as well as trade uncertainties. Besides, from their previous ‘wait-and-see’ approach, Powell now stated that the FED is not considering to raise the interest rates in the near term as they now see more evidence on the effects of a higher accommodative (looser) monetary policy. The change in tone compared to the previous meeting led to investors risk aversion, causing them to sell the dollar and buy back into safe-haven assets, causing the large shadows in XAUUSD (Gold), DXY (Dollar Index) & USDJPY currency pair’s technical chart.