Dollar dazzles after US rate cut but stocks blindsided

August 1, 2019: The dollar pushed higher on Thursday following the US Federal Reserve's first rate cut in more than a decade but a lack of clear signals on future easing whipsawed equity markets.

The move to ease the cost of borrowing had been well telegraphed and was meant to inoculate against global risks washing onto American shores.

Fed chair Jerome Powell said the US central bank decided on a 25-basis-point cut in the rate to “insure against downside risks from weak global growth and trade policy uncertainty”.

He told reporters he remains confident in the American economy and sees no sectors ready to go “bust”.

Some in the markets, as well as US President Donald Trump, thought the Fed might go for a bigger cut and signal that further easing was on the way, but Powell declined to commit to, or rule out, further cuts.

Moreover, the decision to cut rates on Wednesday wasn't unanimous, with two members voting against.

“Investors quickly came to the conclusion that, with an 8-2 vote and a reluctance to commit to further cuts, the Fed was less dovish than they had believed,” said analysts at Moneycorp.

“They marked down equity prices and took the US dollar higher.”

The Fed decision sent the US dollar rallying to its highest level in more than two years against the euro and the pound.

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Posted on: 2019-08-01T17:03:00+05:00

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