www.investing.

com/analysis/us-dollar-falls-to-multimonth-lows-as-fed-signals-no-hikes-through-2022-200527346

U.S. Dollar Falls to Multi-Month Lows as Fed

Signals No Hikes Through 2022
By Kathy Lien | 4 hours ago (Jun 10, 2020 05:21PM ET)

Kathy Lien Follow

Articles (2012)

Investors drove U.S. dollars to fresh lows after the Federal Reserve made it clear that zero interest rates are here to stay, at least
for the next year and a half. According to the updated dot plot of interest rate projections in June, U.S. policy-makers do not see a
rate hike before the end of 2022. They also felt that continued purchases of Treasury- and mortgage-backed securities “at least at
the current place” is necessary, leaving the door open to further bond purchases.

The prospect of cheap and easy money for another 18 months is negative for the U.S. dollar because it eliminates the hope for any
meaningful increase in yields and discourages safe-haven trades. A central bank’s reluctance to rate hikes hurts the market in a
backdrop of deteriorating growth, but when markets and economies are in recovery mode like now, keeping interest rates low to
support a stronger recovery encourages risk-taking. For all these reasons, the euro , sterling , the Australian , Canadian and
New Zealand dollars climbed to multi-month highs versus the greenback. The biggest beneficiary was the Australian dollar, which
rose more than 1% to its strongest level since July 2019. EUR/USD broke through 1.14 to a nearly 3-month high.

The need for accommodative policy was made clear in the Fed’s view that the virus poses considerable risks and, in Fed Chairman
Jerome Powell’s comment today, the central bank is not even thinking about raising interest rates. The May jobs report was good,
but the BLS jobless rate likely understates unemployment and it's not clear if the labor market hit a bottom in May, according to
Powell. Nonetheless, he sees a second-half recovery that is supported by zero-interest rates. Full recovery, however, is “unlikely to
occur until people feel safe.” As a result, they will keep using emergency lending powers forcefully and adjust bond-buying as
needed. It needs to continue buying bonds and keep interest rates at zero because there’s a lot of “work to be done” to get 22
million to 24 million back to work, and millions may be out of work for some time. The next few months will be “important in judging
the real story,” but it's clear from the Fed’s economic projections and Powell’s cautiously optimistic tone that the central bank’s work
has gone from preventing a depression to encouraging a recovery, which is good news for the U.S. economy.

Here are the main takeaways from the Fed announcement:

+ Buying bonds “at least at current pace”

+ Sees rates at zero through 2022
+ No negative rate dots
+ Expects 9.3% unemployment rate end of 2020, 6.5% end of 2021
+ Sees GDP falling 6.5% in 2020, rising 5% in 2021

USD/JPY pulled back post FOMC, but with further improvements expected in U.S. data, the losses should be limited.

Can risk trades carry on? Based on today’s FOMC, the answer is yes, but the overextended moves in currency pairs, such as
EUR/USD, AUD/USD, NZD/USD and USD/CAD begs for a correction. For the past few weeks, investors have been driving
currencies and equities higher on the premise that the worst is over and Powell’s comments along with the FOMC projections
suggests that the central bank shares these views.
Comments (11)

Paul Tan
34 minutes ago

Basically nothing change and yet USD could drop to multi-month low in just 3 days. We are witnessing self fulfilling prophecy
at work.

Reply 0 0 Report

Emmanuel Aprilakis
41 minutes ago
The end of 2022 is in 2.5 years, not 1.5
Reply 0 0 Report

ChrisBlackforex
2 hours ago

Thank you!Kay 50/50 Powell B S Lost 38Pips

Reply 0 0 Report
 Lawrence Glickman
2 hours ago
If the Fed continues this madness of stealing from retirees living on fixed incomes in a vain attempt to pump up the stock
Market the result is a future crash that will make 1929 look like a picnic. Please go and read about the Tulip crash where a
tulip wa... Show more

Reply 1 0 Report

Katto Alex
2 hours ago

The best writer, good work, keep it up

Reply 3 0 Report

Hol volt Hol nem volt

2 hours ago

looks like $ holders left alone

Reply 1 0 Report

Dr Ali
3 hours ago
Every other market analyst is a failure these days and she tops them all.

Reply 3 0 Report

Wiwien Wiwien
3 hours ago
Always difiicult to read . Good information but bad in writting.

Reply 0 1 Report

Hol volt Hol nem volt

4 hours ago

is $ worth to keep ?
Reply 6 0 Report

Av8er31
3 hours ago

Nope, gold is the way to go. Dollar is ending its reign.

Reply 0 1 Report

TrickyDick
4 hours ago

She's always wrong and anti-usd, do the opposite of what she says and you will be rich
Reply 6 10 Report
 Hol volt Hol nem volt
4 hours ago
that's not true I kept $ and lost a bunch of money. I just hope fed is not goving up on it .

Reply 0 0 Report

Mohammad Hussein
4 hours ago

Reply 1 0 Report

Kevin smarte
4 hours ago

good info tks

Reply 2 0 Report