Dollar Trades Stronger Ahead of Fed’s Funds Rate Hike

Dollar Trades Stronger Ahead of Fed’s Funds Rate Hike

The US dollar improved against its major trading partners early Thursday, other than a small decline against the euro ahead of the European Central Bank’s monetary policy decision.

Fed officials are in a quiet period ahead of the July 26-27 Federal Open Market Committee meeting, where a second straight 75-basis point rate increase is expected, but a 100-basis point increase has not been completely ruled out.

A quick summary of foreign exchange activity heading into Thursday shows that USDJPY rose to 138.6034 from 138.2697 at the Wednesday US close and 138.1867 at the same point Wednesday morning.

The Bank of Japan made no change to its monetary policy stance, as expected, though it did raise its inflation outlook. Even with the adjustment, inflation in Japan is expected to remain well below that in other major economies and slower economic growth is also expected.

Trade data released earlier showed Japanese exports rose at their fastest pace in seven months in June. USDCAD rose to 1.2919 from 1.2881 at the Wednesday US close and 1.2878 at the same point Wednesday morning before the release of softer-than-expected Canadian consumer inflation data.

The Canadian housing price index is scheduled to be released today. Also, the Bank of Canada’s monetary policy committee meets next on Sept. 7. READ: Dollar Mixed as Markets Seek Assurance of Fed’s Cautious Move

USDEUR rose to 1.0193 from 1.0182 at the Wednesday US close and 1.0205 at the same point Wednesday morning. The European Central Bank’s interest rate announcement is expected, followed by an appearance by ECB President Christine Lagarde.

Markets expect the ECB to tighten policy for the first time since 2011 at its meeting on Thursday, with the possibility of a 50-basis point increase. GBPUSD fell to 1.1944 from 1.1979 at the Wednesday US close and 1.1988 at the same point Wednesday morning.

There are no UK data scheduled for release on Thursday. The Bank of England meets next on Aug. 4, when it is expected to continue its tightening cycle with the possibility of a larger 50-basis point increase. # Dollar Trades Stronger Ahead of Fed’s Funds Rate Hike