The dollar’s performance was mixed after the Federal Reserve left interest rates unchanged. It weakened during the decision and Chair Warsh’s press conference, while currency moves also reflected diverging central-bank policies: Australian inflation supported the Australian dollar, an unexpected Reserve Bank of New Zealand hold pressured the kiwi, and a Bank of Canada rate hike boosted the loonie. US Treasury yields fell at the short end and rose at the long end, steepening the curve. That shift eased expectations of another near-term rate increase but did not prompt markets to price in rate cuts.
Euro and Australian dollar gain as currencies diverge
The dollar strengthened against the New Zealand dollar but weakened against the Australian dollar. At the close, EUR/USD was at 1.1155, up 0.30%; GBP/USD stood at 1.3325, up 0.17%; and AUD/USD rose 0.44% to 0.7055. USD/JPY was little changed at 157.94, while USD/CHF fell 0.10% to 0.8282. USD/CAD dropped 0.40% to 1.3992, and NZD/USD lost 0.95% to 0.5626.
EUR/USD rebounded from a double-bottom area near 1.1113 and later climbed to 1.11746, close to its declining 100-hour moving average. That level is a near-term point of focus: unless the pair breaks above it, sellers remain in control. No further confirmation signals were provided, so the move does not establish that the trend has reversed.
Hotter Australian core inflation data supported the Aussie and strengthened expectations of further Reserve Bank of Australia tightening. AUD/USD closed at 0.7055 after trading around its 200-day moving average during the session.
The kiwi came under pressure after the RBNZ unexpectedly held its policy rate at 2.75%. The decision passed by a narrow 4–3 vote, disappointing traders who had positioned for a hike. NZD/USD recovered from its lows and approached the 0.5625–0.5633 trading range.
Bank of Canada hike lifts the loonie
The Bank of Canada raised its policy rate by 25 basis points to 2.50%, helping the Canadian dollar strengthen. The central bank said inflation was becoming more persistent, but signalled that any further tightening would need to proceed cautiously given uncertainty. USD/CAD fell 0.40% to 1.3992.
The Fed decision was reflected more clearly in the Treasury curve. The two-year yield fell 1.25 basis points to 4.7245%, while the five-year rose 2.37 basis points to 4.8657%. The 10-year yield gained 4.74 basis points to 5.0404%, and the 30-year rose 5.27 basis points to 5.3577%. Short-term yields declined as longer-term yields climbed, steepening the curve. The 10-year yield remained above 5%, showing that reduced pressure for an immediate rate hike had not translated into lower long-term borrowing costs.
Fed waits for more data, leaving December decision open
Chair Warsh reiterated that inflation remains above target and that policymakers want more information before deciding on their next move. The Fed kept its 2% personal consumption expenditures (PCE) inflation target unchanged. Short-term inflation expectations have risen, while longer-term expectations remain consistent with the goal of restoring price stability.
Warsh offered a relatively positive assessment of the economy, saying growth had strengthened, employment remained solid and business investment was broadening. He also said productivity gains could allow the economy to grow without generating a corresponding increase in inflationary pressure. He made no advance commitment on whether the Fed would act in December, describing the coming period as one in which policymakers would receive substantial new information. Another rate increase remains possible, but the remarks included no firm commitment and showed no urgency to cut rates.
Market reactions to the decision were mixed. The dollar weakened during the announcement and press conference, short-term Treasury yields fell and longer-term yields rose. Major US stock indexes closed modestly higher, while international oil prices remained above $100 a barrel. For currency markets, the focus is on an uncertain interest-rate path and increasingly divergent policy stances among central banks.
Microsoft and Alphabet results add to market focus
Microsoft and Alphabet reported earnings after the US market close, adding another factor for investors to assess. Microsoft posted fiscal first-quarter earnings per share of $4.92, above the $4.72 expected, and revenue of $92.3 billion, ahead of the $90.6 billion forecast. Azure revenue growth, excluding foreign-exchange effects, was 48%, above expectations of 44.8%. Cloud performance was strong, but the companies’ results did not change the closing direction of the major currency pairs that day.
Alphabet’s third-quarter results were mixed. Earnings per share came in at $2.12, below the $3.03 expected, while revenue of $127.6 billion was slightly short of the $127.91 billion forecast. Google Cloud revenue reached $30.71 billion, beating expectations of $29.1 billion. Search and other revenue, YouTube advertising revenue and operating income were all below forecasts. Technology earnings and moves in longer-term Treasury yields remain among the factors shaping assessments of the dollar and risk appetite; the available figures did not confirm either company’s after-hours share-price reaction.