Dollar hovers near 11-week low on Fed rate cut bets

Jerome Powell

America's greenback has suffered broadly of late as investors dumped it in response to increasing signs the economy is slowing which, coming amid an escalation of the U.S. That report measures the average change in producer prices for goods.

"The history of this spread back to '89 suggests the market has never priced an amount of inversion equal to today's levels without the Fed cutting", the analysts wrote. The core PCE price index has been running below the Fed's 2 per cent target this year.

U.S. Treasury Secretary Steven Mnuchin, speaking in an interview Saturday in Fukuoka, Japan, where he was attending a G-20 meeting of finance ministers and central bank chiefs, said the proposal does not signal a preference for a weaker dollar.

Above: Bureau of Labour Statistics table of US inflation rates.

The Fed can afford to be aggressive because inflationary pressures are muted. Non-alcoholic beverages increased 1.2% last month. Economists polled by Reuters had forecast the CPI would rise 0.1 per cent in May and 1.9 per cent year-on-year.

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Fresh worries erupted on the trade front after President Donald Trump said he was holding up a deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points. Last month, Fed Chairman Jerome Powell downplayed speculation that the central bank would cut rates - but heightened trade tensions and a darkening economic outlook are making a cut more likely, according to a Wall Street Journal report.

Powell and his colleagues are expected to begin initial discussions on the rate cut decision tree at their upcoming meeting, though they're seen as unlikely to reach a conclusion at the June 18-19 gathering.

But Kathy Bostjancic of Oxford Economics said the Fed will hold off before cutting the benchmark lending rate, and watch to see the impact of tariffs on the economy.

The first real sign of trouble that the United States economy may be fast running out steam came from Friday's jobs report that showed a big drop in payrolls in May. Current: 2.25%-to-2.5%. However, sluggish inflation and other economic indicators have led the central bank to keep the rate unchanged at its last three meetings. This was much lower than the 180K that investors were expecting.

President Trump reignited his attacks on the Federal Reserve on Tuesday morning, criticizing the USA central bank for raising interest rates too frequently in 2018. A specialist broker can deliver you an exchange rate closer to the real market rate, thereby saving you substantial quantities of currency.

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