TheÂ US dollar is surging midweek after theÂ Federal Reserve cut interest rates atÂ its September Federal Open Market Committee (FOMC). Additional easing is expected this year, leaving many toÂ wonder if another round ofÂ quantitative easing (QE) is coming. Housing data further contributed toÂ theÂ dollarâs trading earlier inÂ theÂ session.
OnÂ Wednesday, theÂ Fed announced aÂ quarter-point cut toÂ theÂ fed funds rate toÂ aÂ target range ofÂ 1.75% toÂ 2.00%.
TheÂ central bank also reduced theÂ interest rate onÂ excess reserves toÂ 1.80%.
One ofÂ theÂ bigger stories coming out ofÂ theÂ policy meeting is that theÂ dot plot suggests seven Fed officials project one more rate cut this year. TheÂ Fed has said that it will âact asÂ appropriate toÂ sustainâ theÂ national economy.
TheÂ Fed noted inÂ aÂ statement:
AsÂ theÂ Committee contemplates theÂ future path ofÂ theÂ target range forÂ theÂ federal funds rate, it will continue toÂ monitor theÂ implications ofÂ incoming information forÂ theÂ economic outlook andÂ will act asÂ appropriate toÂ sustain theÂ expansion, with aÂ strong labor market andÂ inflation near its symmetric 2 percent objective.
InÂ determining theÂ timing andÂ size ofÂ future adjustments toÂ theÂ target range forÂ theÂ federal funds rate, theÂ Committee will assess realized andÂ expected economic conditions relative toÂ its maximum employment objective andÂ its symmetric 2 percent inflation objective. This assessment will take into account aÂ wide range ofÂ information, including measures ofÂ labor market conditions, indicators ofÂ inflation pressures andÂ inflation expectations, andÂ readings onÂ financial andÂ international developments.
Only three dissented against the decision. St. Louis Fed Bank President James Bullard had preferred a 50-basis-point cut to a range of 1.50% to 1.75%. Kansas City Fed Bank President and Boston Fed Bank PresidentEsther George and Eric Rosengren wanted to leave rates unchanged.
OnÂ theÂ data front, theÂ housing market performed better than expected.
According toÂ theÂ Mortgage Bankers Association (MBA), mortgage applications slipped 0.1% inÂ theÂ week ending September 13, which represents theÂ ninth decline since theÂ end ofÂ June. Also, refinance applications fell 4.3%, while applications toÂ acquire aÂ home climbed 6.4%.
TheÂ US Census Bureau reported that building permits surged 7.7% inÂ August, up from theÂ 6.9% gain inÂ July. It also beat market expectations ofÂ aÂ 3.1% contraction. Housing starts advanced 12.3% last month toÂ aÂ seasonally adjusted 1.364 million, theÂ highest level since July 2007.
TheÂ US Dollar Index rose 0.14% toÂ 98.40, from anÂ opening ofÂ 98.21.
TheÂ USD/CAD currency pair climbed 0.34% toÂ 1.3289, from anÂ opening ofÂ 1.3247, atÂ 18:11 GMT onÂ Wednesday. TheÂ EUR/USD fell 0.26% toÂ 1.1045, from anÂ opening ofÂ 1.1073.
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