Dollar steadies ahead of Fed meeting; trading ranges are limited

Investing.com - The U.S. dollar traded largely unchanged in early European trade Tuesday, drifting ahead of the start of the latest two-day Federal Reserve policy meeting, the highlight of several key central bank rate decisions this week.

At 03:20 ET (07:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely flat at 104.862, remaining close to last week’s six-month high.

Fed to hold out rate hike possibility

Currency moves appear relatively subdued Tuesday, with traders seemingly unwilling to take further positions ahead of the result of this week’s U.S. Federal Reserve meeting.

The Fed officials get together later in the session, before announcing their decision on Wednesday. The policymakers are widely expected to keep interest rates on hold, but with inflation still elevated and economic data tending to show a resilient economy, they are also likely to maintain a hawkish stance.

“Here, our team sees a resolutely hawkish Federal Reserve, where despite unchanged rates the Fed, through its statement and dot plots, will hold out the possibility of one further hike to the 5.50-5.75% range later this year,” analysts at ING said, in a note.

The main economic data due Tuesday comes from the real estate sector, with housing starts for August expected to come in at an annualized 1.44 million, while building permits are also expected to be 1.44 million.

ECB pushes back at dovish tone

EUR/USD fell 0.1% to 1.0680, with the euro handing back some of the previous session’s gains after European Central Bank policymakers pushed back on the idea that a rate cut may soon be on the cards.

The ECB hinted that Thursday’s may have been its last for now, but policymakers will need until March to be sure and further rate hikes cannot yet be ruled out, Slovak policymaker Peter Kazimir said on Monday.

"Only the March forecast can confirm that we are heading unequivocally and steadily towards our inflation goal," Kazimir said. "That is why I cannot rule out the possibility of further rate increases today."

The eurozone’s final inflation figures for August are due later in the session, and are expected to confirm that CPI rose 0.6% on the month, a rise of 5.3% on an annual basis.

This is still substantially above the European Central Bank’s 2% medium term inflation target, but core inflation, which excludes volatile energy and food prices, is seen falling to 5.3% from 5.5% annually.

BOJ set to keep monetary stimulus

USD/JPY rose 0.1% to 147.80, with Friday’s Bank of Japan meeting in focus after Governor Kazuo Ueda last week stoked speculation of an imminent move away from ultra-loose policy.

Expectations are for the BOJ to keep interest rates ultra-low on Friday and reassure markets that monetary stimulus will stay, at least for now.

Additionally, GBP/USD fell 0.1% 1.2374 ahead of Thursday’s Bank of England meeting. The central bank is expected to deliver another rate hike, but with the U.K. economy cooling this could prove to be the last in its current tightening cycle.

AUD/USD edged higher to 0.6436, after the minutes of the Reserve Bank of Australia's last meeting showed it considered raising rates by 25 basis points, before eventually deciding to hold rates unchanged.

Thursday also sees meetings from the Swiss National Bank, the Riksbank, and the Norges Bank.

 

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services (UK) Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

www.onefinancialmarkets.com is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: