U.S Dollar propels high as investors await Fed decision

 U.S Dollar propels high as investors await Fed decision

U.S Dollar propels high as investors await Fed decision.

Spread the love

On Monday morning, the dollar was up ahead of the latest Federal Reserve policy announcement later in the week.

By early trading in London, the U.S. Dollar Index fell 0.10% to 95.735 index points, tracking the greenback against a basket of major currencies.

Currently, there is a bounce in the US Dollar Index (DXY) from a level that first became significant in March 2020.

Short-term strength at the moment is unclear. It could simply be a bounce or the start of a new uptrend after the low in May.

Despite recent price weakness, current strength is pushing price back above the trend-line (95.5). If trend support is fully recaptured, the upward trend could resume, but confidence in that scenario remains low.

As of right now, the DXY is finding it difficult to climb above resistance from the range that developed late November until last week. Even if the index continues to rise, this could create a short-term ceiling around 96.

However, the greenback’s fundamentals remain upbeat with currency markets being influenced by expectations of when and how quickly central banks will raise interest rates.

Investors will be alert to any announcements Chair Powell might make about quantitative tightening later in 2022.

It is likely that the Fed will raise interest rates for the first time since early 2020 when it announces its policy decision on Wednesday.

In the event that the Fed says it must act soon due to very high inflation, likely in March 2022, then we see a higher risk. It is possible that the Fed will abruptly cease quantitative easing by mid-February if the urgency is significant

Markets may even price the risk of a 50bp rate hike in March if the Fed makes a bullish statement and/or ends the QE program sooner. Additionally, currency analysts predict that this would result in a knee-jerk increase in the dollar.

The Bank of Canada’s policy decision is also expected shortly before the Fed’s.

Bitcoin traded at $35K in the crypto market on Saturday after falling as low as $34,000 on Friday after tumbling 10%.

Olumide Adesina

Olumide Adesina a France-born Nigerian, a Certified Investment Trader, with more than a decade of working expertise in Investment and Trading. He is also a reputable author and writer for CoinDesk and FxEmpire.

Related post