Aussie dollar crashes following surprise Federal Reserve move
The Aussie dollar has collapsed during this morning’s trading as the US Federal Reserve says the rate cutting cycle will slow down.
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The Aussie dollar has hit a 24-month low after the US federal reserve said it would be ‘more cautious’ with rate cuts in 2025.
In bad news for travellers, the Aussie dollar has fallen below 62.3 US cents this morning, to reach its lowest levels since October 2022.
The cause of this was the US Federal Reserve’s decision to cut interest rates by 0.25 per cent, in line with market expectations.
The bank surprised markets by indicating there would only be two more rate cuts next year, a drop from September, when they had forecast four cuts in 2025.
”With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” said Fed chair Jerome Powell, at a press conference.
”We can therefore be more cautious as we consider further adjustments to our policy rate.
”Today was a closer call but we decided it was the right call.”
According to the Federal Reserve, monetary policy has changed since President elect Donald Trump won the election. He is likely to bring in a low tax, higher tariff environment which the board says could be inflationary.
Capital.com’s senior financial market analyst Kyle Rodda said the Federal Reserve delivered a surprise hawkish tone which sent the Australian dollar crashing down.
“The US Dollar leapt, with the AUD/USD, already strangled by weaker domestic and Chinese growth, hit the 62 handle.”
“The lift in the median dot was expected and the Fed’s projection for only two cuts in 2025 brought forecasts in line with market rates, which have long implied a higher trough and neutral rate,” Mr Rodda said.
“However, the emphasis on upside risks to inflation, the likelihood of a prolonged pause in further cuts and some degree of a higher for longer dynamic spooked investors and catalysed risk-off moves.”
Originally published as Aussie dollar crashes following surprise Federal Reserve move
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