FEDERAL RESERVE KEEP INTEREST RATES UNCHANGED BUT RAISE CONCERNS ABOUT LOW U.S INFLATION

FED ACKNOWLEDGE LOW INFLATION

Federal Reserve policy makers kept the U.S benchmark interest rate unchanged, as inflation remains persistently low in the United States economy, even though the job U.S market continues to strengthen, with the unemployment rate at a record low 4.4 per cent.

The Federal Reserve policy statement noted that U.S inflation has stayed undesirably low, which marked a notable change in language towards persistently low U.S inflation.

The initial market reaction saw the US dollar move sharply lower, with the US dollar index moving to its lowest level since June 23, 2016.

UK Q2 GDP MEETS CONSENSUS

The UK economy expanded by 0.3 per cent in the second quarter of 2017, coming in line with consensus forecasts, as high inflation and slow wage growth continued to weigh on the domestic economy.

Sterling initially moved lower as the GDP figure marked the slowest first half start to a fiscal year for the UK, since 2012. The GBPUSD pair later moved to its highest level since September 2016, following the Federal Reserve's dovish July monetary policy statement.

LOW INFLATION RISING AUSSIE

The Australian dollar had a roller coaster week, initially weakening as Australian second quarter inflation figures came in much weaker than expected, at 0.2 percent. Analysts had forecasted inflation to increase 0.4 percent during the second fiscal quarter.

However, following the Federal Reserve policy statement, the Australian dollar moved higher, reaching trading levels not seen since May 2015, hitting $0.8066 cents against the U.S dollar.

GERMAN IFO AND EURO HIT YEARLY HIGHS

German business confidence unexpectedly rose in July, the IFO survey showed this week, reaching the third record high in as many months as Europe's largest economy powered ahead and morale lifted across the industry.

The EURO currency rallied to a two and a half year trading high against the U.S dollar, reaching the 1.1776 level, as a less hawkish Federal Reserve policy statement weighed boosted the EURUSD pair.