Currency Update for Steel Trading Nations

The Fed once again elected not raise rates in their September 21st announcement. On the 22nd Ian Bezek had this to say: “For those who wanted decisive action, the Fed’s latest move failed to please, however, there were three dissenters against the decision – a large number for the Fed – and the vast majority of Fed members see a hike coming before year-end. Current economic data seemingly met the Fed’s standards for an immediate hike. Whether they didn’t want blame for causing market volatility ahead of an election, or other reasons, the Fed chickened out on a September hike. But, with that many dissenters, the Fed is virtually forced into making the next hike in December. The initial reaction to the news seems positive. Stocks jumped and volatility tanked. The dollar moved lower, generating enthusiasm for emerging market shares, along with commodities. Gold and precious metal miners in particular loved the Fed’s decision to forego an immediate hike.”

On September 26th Andrew Hecht wrote, “The greenback is in neutral. It does not know which way to go. Compared to the other major currencies of the world, the dollar remains attractive from a yield perspective, but the greenback continues to go nowhere. The dollar has the most contentious election in history in front of it, but it refuses to tank. In their statement, the central bank reiterated that the case for a rate hike has strengthened. They pointed to moderate economic growth and positive employment data. They told markets that risks to the U.S. economy have diminished, and inflation is moving toward the 2 percent target rate. However, at the end of the day, despite three dissenters, the Fed decided to wait for further evidence of “continued progress” in the economy before they will finally pull the rate-hike trigger.”