The US dollar fell against its major peers during the Thursday’s trading session as poor economic data and dovish comments from some Fed policy makers led to speculations that the Federal Reserve would not be able to continue with its planned monetary tightening.
New York Fed President William Dudley made dovish comments on Wednesday, saying:
One thing I think we can say with more confidence is that financial conditions are considerably tighter than they were at the time of the December meeting. So if those financial conditions were to remain in place by the time we get to the March meeting, we would have to take that into consideration in terms of that monetary policy decision.
Indeed, today’s economic data demonstrated a drop of factory orders and growth of unemployment did not paint a pretty picture of the US economy. Yet not everyone was so pessimistic. For an example, Cleveland Fed President Loretta Mester thought that the US central bank can overcome the recent market turbulence:
Until we see further evidence to the contrary, my expectation is that the U.S. economy will work through the latest episode of market turbulence and soft patch to regain its footing for moderate growth, even as the energy and manufacturing sectors remain challenged.
The weakness of the greenback helped commodities and commodity-related currencies to rally. At the same time, Britain’s sterling was unable to beat the dollar as the outlook for monetary policy of the UK central bank was not particularly hawkish either.
EUR/USD gained from 1.1103 to 1.1201 as of 23:39 GMT today. USD/JPY sank from 117.87 to 116.85. Meanwhile, GBP/USD attempted to rally, rising from 1.4597 to 1.4667, but failed and pulled back to 1.4579.
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