The Federal Reserve left rates unchanged and continued the record QE monetary policies. The change was to the commentary, which was more positive than the last meeting, with semantic changes. The Fed noted ‘economic activity and employment have picked up somewhat in recent months’. The improving US economy has also been reflected in rising equity markets, while the safe haven US Dollar, has gone south as pressure eases. The GBP has rallied strongly up to 1.3000, while the yen has pushed up to 104.80, reflecting the weaker US Dollar.
The Australian market was shocked by the local domestic, inflation data. The CPI number indicated no inflation and in fact was a contraction of 1.9%, which is now deflation! This was the lowest number since records have been kept in more than 72 years! This is a indictment on the challenges facing the Australian economy. This did not disrupt the rising currency, as the AUD rallied to 0.7180, while the NZD traded above 0.6650. This is a product of the flagging reserve rather than any innate domestic economic strength.
US/China relations remain a serious threat to vulnerable trade exposed currencies, while the ‘second wave’ of the virus threatens global economic activity.