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By xemarketanalysis September 21, 2017 2:05 pm
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    XE Market Analysis: Dollar Rally Fades as Market Doubts Fed Plans


    • USD had rallied strongly after FOMC announced an end to Q.E. and signaled a further rate rise.
    • GBP firm after BBC reports PM May will announce €20 billion payments to EU.
    • CAD recovering from a post-Fed dip on strong domestic data. 
    • EUR steady as consumer confidence rises by more than expected.
    • AUD weaker after Assistant Governor Lowe downplays the need for rate hikes.
    • S&P downgrades China to A+, stable from AA-, negative.
    • Bank of Japan keeps rates on hold and new board member dissents pushing for more stimulus. 


    The US Dollar rallied 1.5% versus its major counterparts after the Federal Reserve announced it will reduce its unprecedented holdings of government from next month, and it unexpectedly stuck to its plans to raise rates one more time this year. The interest rate outlook for next year remained largely unchanged, with three rises envisioned in 2018. However, the Dollar rally has since begun to fade, with the market remaining doubtful of the Fed's plans.


    The US Dollar is set to close the day lower after an impressive rally following the Fed announcement (see highlight).


    The Pound is strengthening on reports that Theresa May will announce plans to pay €20 billion during a two-year transitional period, providing it allows the UK to maintain access to the single market and the customs union.


    The Euro is trading steady, back above 1.19 after sliding sharply last night as the Fed unveiled plans to raise rates by 1% over the next year. The Euro may struggle as central banks consider raising rates, while the ECB is still potentially pumping tens of billions of Euros into the Euro-zone financial system.


    The Canadian Dollar is flat on the day with the release of unexpectedly strong wholesale trade data boosting the Loonie. Wholesale trade rose 1.5% in July against forecasts for a decline of 0.9% and was the biggest increase since January.


    The Aussie Dollar is down sharply today, down over 1% versus its major counterparts after Reserve Bank of Australia Governor Philip Lowe said, “a rise in global interest rates has no automatic implications for us here in Australia”. That followed comments yesterday signaling the bank was comfortable with inflation taking time to return to target.


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