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Dollar Up With Fed Meetup in Sight 

The dollar rose slightly higher in early European forex trading on Tuesday. But ranges are tight as investors await the next meeting of the Federal Reserve for guidance. The dollar index was up 0.2% at 96.823 following an over 3%  drop in the last month.

 Last week U.S. data for May caught markets by surprise with an unexpected increase in employment. Futures pricing now shows investors are no longer expecting U.S. rates to dip negative next year.

The focus is now firmly on the Federal Reserve Meeting and it’s not expected to change interest rate settings. Investors weigh up the likelihood of stepped-up bond buying in the wake of the employment report.

The Fed may acknowledge the better jobs report. They are in an extended way of removing the liquidity punchbowl that has fuelled the rally in financial markets. A steady FOMC statement with regards to asset purchases should allow the dollar to continue its bear trend. This was according to analysts at ING in a research note.

Elsewhere in FX news, EUR/USD traded 0.2% lower at 1.1272, showing limited weakness. This followed German export data slumping in April as the coronavirus crisis slashed demand for goods from Europe’s biggest economy.

The euro has been boosted by the European Central Bank’s move on Thursday. That was to increase its emergency bond purchase scheme to 1.35 trillion euros, more than had been expected.

Sterling has also weakened against the dollar on Tuesday, with GBP/USD down 0.2%. But it was remaining around the 1.27 level.

Dollar Up in Asia, Anticipating the Fed Policy Meet

The dollar was up on Tuesday morning in forex Asia. Investors were looking towards the next moves from the U.S. Federal Reserve ahead of its policy meeting.

The USD/JPY pair fell 0.3% to 108.09, edging lower. It hit a high of 108.55 to the dollar earlier in the session, a level not seen since April. That was over the possibility of increased bond purchases, or even a dovish outlook, from the Fed.

Yukio Ishizuki, foreign exchange strategist at Daiwa Securities said Japanese names have been very active since Monday in dollar/yen. It was trying to trade off the chance of some kind of yield-curve control from the Fed. She said she personally doesn’t think yield curve control is necessary now, but the dollar is under clear selling pressure.

Meanwhile, the USD/CNY pair gained 0.12% to 7.0784.

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