US Dollar Firms as Markets Eyeing Wednesday FOMC Meeting
The US dollar was stronger against its major trading partners early Monday as markets look ahead to an expected acceleration of asset purchase tapering at the conclusion of the two-day Federal Open Market Committee meeting Wednesday.
After a 0.8% increase in consumer prices and a 0.5% gain in core prices reported Friday, which lifted the year-over-year rates to their highest levels in decades, the FOMC has further reason to wrap up its asset purchase program sooner next year, perhaps by March.
There are no key US data scheduled to be released Monday and Fed speakers remain in their quiet period until after the meeting.
A quick summary of foreign exchange action heading into Monday shows that GBP-USD slipped to 1.3258 from 1.3266 at the Friday US close but is up from 1.3199 at the same point Friday. The Bank of England is expected to postpone a rate increase until early-2022.
UK inflation data will be released Wednesday and is expected to show prices gains accelerated, but the report is unlikely to offset the impact of the omicron variant and the uncertainty of the various political scandals that are chipping away at confidence in the current government.
EUR-USD fell to 1.1278 from 1.1316 at the Friday US close but was up marginally from 1.1268 at the same point Friday.
The euro is likely to see further declines this week as both the Fed and the Bank of England are seen remaining on a hawkish track even though interest rates are left unchanged.
This stands in stark contrast to the European Central Bank, which is going to need to see a reduction in COVID lockdowns and further economic improvement before it can tighten its policy.
USD-JPY rose to 113.5734 from 113.3715 at the Friday US close but was lower than the 113.7364 level at the same point Friday morning.
Japan’s Tankan business survey released earlier Monday was mixed despite a new government, increased vaccinations and lower COVID cases and a new round of fiscal stimulus. The Bank of Japan is expected to maintain its accommodative policy stance at its meeting next week.
USD-CAD rose to 1.2764 from 1.2724 at the Friday US close and from 1.2701 at the same point on Friday. The policy statement from the Bank of Canada last week was relatively dovish compared with market expectations for substantial tightening over the next week.
Wednesday’s consumer price readings will be the key release from Canada this week, where a strong reading could assure markets that those BoC rate increases will be back on the table. #US Dollar Firms as Markets Eyeing Wednesday FOMC Meeting
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