· The dollar fell on Wednesday, after the Federal Reserve held interest rates steady, as expected, and struck a cautious tone on its outlook for the economy and future interest rate increases.
In mid-morning trading, the dollar index sank 0.4 percent to 95.455.
The dollar dropped 0.5 percent against the yen to 108.93 yen, the euro rose 0.4 percent to $1.1479, recovering from earlier losses.
· The Federal Reserve opted not to raise interest rates during its policy meeting this week and pledged that future moves will be done patiently and with an eye toward how economic conditions unfold.
In a statement Wednesday, the central bank voted unanimously to hold its policy rate in a range between 2.25 percent and 2.5 percent.
“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the statement said.
The Fed said it would be patient in lifting borrowing costs further this year as it pointed to rising uncertainty about the U.S. economic outlook. It also said it would be prepared to use the full range of tools, including altering the size and composition of its balance sheet, if the economy needed more monetary accommodation, than could be achieved with rate cuts.
Following the Fed statement, contracts tied to the policy rate continued to price about a one-in-four chance of a 2019 Fed rate hike, and contracts maturing in 2020 were signaling a small but rising chance of a rate cut then.
· Brian Coulton, chief economist at Fitch Ratings in London, said the Fed comments read “more like a pause” than a strong signal that the U.S. central bank was approaching the end of its tightening cycle.
· Federal Reserve Chairman Jerome Powell issued his strongest statement yet Wednesday that the central bank has changed its outlook regarding interest rate hikes.
"The case for raising rates has weakened somewhat," Powell said during a news conference following this week's two-day Federal Open Market Committee meeting.
The statement came after the FOMC decided to leave its benchmark interest rate target unchanged at 2.25 percent to 2.5 percent. In addition, the committee vowed to take a "patient" approach toward further hikes. Powell added that the funds rate is "in the committee's" range of a neutral rate estimate, a key measure for the Fed.
"I would want to see a need for further rate increases," Powell said Wednesday, adding that inflation would be key.
Also causing some concern on the Fed are geopolitical issues like the ongoing Brexit negotiations and an economic slowdown in China.
As things currently stand, Powell said the committee can take its time before additional rate moves. The Fed has hiked its benchmark rate eight times since it began the normalization process in December 2015and has indicated two more increases in 2019.
However, futures markets are pricing in no further tightening and in fact are noting a small chance for a rate cut over the next year. "Today, the FOMC decided that the cumulative effect of those developments … warrant a patient wait-and-see approach regarding future policy changes."
· China and the United States are expected to hold one or two more rounds of trade talks to map out a plan to end to their tariff war before the March 1 deadline, according to a diplomatic source and observers.
The assessment came as representatives from both nations in Washington were due to start two days of negotiations on Wednesday, where China was expected to respond to a series of demands made by the US in a previous round of talks in early January.
The Chinese delegation led by Vice-Premier Liu He arrived in Washington on Tuesday, where the delegation held an internal preparatory meeting.
Negotiations with the US delegations – headed by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin – were expected to last all day on Wednesday, ending with a dinner. The negotiations are expected to be wrapped up on Thursday afternoon, according to a source familiar with the arrangement.
· Oil prices rose on Wednesday, boosted by U.S. government data that showed signs of tightening supply, as investors remained concerned about supply disruptions following U.S. sanctions on Venezuela’s oil industry.
U.S. West Texas Intermediate crude futures ended Wednesday’s session up 92 cents, or 1.7 percent, at $54.23 per barrel, its best closing prices since late November.
International Brent crude oil futures were up 43 cents at $61.75 per barrel around 2:30 p.m. ET.
· Prices extended gains after government data showed U.S. crude oil stockpiles rose less than expected last week due to a drop in imports, while gasoline inventories fell from record highs as refiners slowed down production.
Crude inventories rose 919,000 barrels, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for an increase of 3.2 million barrels.
Reference: CNBC, Reuters
Thai
Eng