Forex Pairs Fluctuate as Markets Await Fed’s Verdict
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Forex Pairs Fluctuate as Markets Await Fed’s Verdict

The greenback stilled on Wednesday trades as traders lie in wait for the outcome of the Federal Reserve’s meeting.

The dollar index, which tracks the performance of the dollar against a basket of six other safe-haven currencies, stood firm at 98.036. It pulled back from a two-month high of 98.206, which the currency hit on Tuesday.

Among forex pairs, the USDJPY exchanged at 108.564, 0.03% lower, as of writing.

The Bank of Japan (BOJ) maintained policies steady, despite the suspicion of a move to further ease interest conditions.

Similarly, Fed policymakers will announce the decision regarding interest rates later in the day. Markets are expecting it to cut them for the first time since the financial crisis of 2008.

They predict the Fed to finally slash rates by 25 basis points (bps). The center focus remains to be whether it would consider a further easing of monetary policies.

Uncertainty aside, it’s a race to bring back growth and face a stagnating economy head-on as trade conflicts continue to harm global growth.

According to Yukio Ishizuki, senior currency strategist at Daiwa Securities, “The Fed will likely try and not dash the prospect of a future rate cut held by the markets. But at the same time Chairman Powell is certainly not in a position to promise an upcoming cut, so he is expected to keep his wording as vague as possible.”

He added that “vague policy references would provide” the dollar and forex pairs that favor the greenback with “an extra lift as it would further temper excessive easing hopes.”

Under the FedWatch Tool by CME, 78% of traders are already seeing a 25-basis-point cut, convincingly. However, the remaining 22% persists on a more aggressive 50-basis-point cut’s probability.

Sterling Bounces Back Amid Escalating Brexit Fears

The Fed’s funds-rate sits between a range of 2.25% to 2.50%. Traders of futures tied to the rate have settled in on the expectation of a full percentage point cut by the end of 2020.

The sterling regained steady footing after it plunged this week. It was due to investors’ fear of Britain’s exit from the European Union without any compromise. All spearheaded by Prime Minister Boris Johnson.

During the day, the U.K. currency climbed 0.1% higher to $1.2157, escaping the trenches of a 28-month trough of $1.2120 touched on Tuesday.

Troubles are still evident for the British pound as it lost 4.3% already in July.

PM Johnson is set on the idea of a “Hard Brexit”. Planning on pulling U.K. out of the E.U. by October 31, disregarding any attempts to come up with an agreement.

The currency continued its down-move after it fell more than 1% on Monday. Johnson confirmed his stance on a no-deal Brexit to the Irish prime minister, Leo Varadkar.

Johnson repeatedly reiterated that there would be no plans to negotiate on his part.

However, according to him, if the E.U. takes out the Irish backstop, an insurance policy to avoid a hard border between Northern Ireland and the Republic of Ireland.

Despite this, E.U. officials also repeated that they would not renegotiate the deal already made with former Prime Minister Theresa May.

Elsewhere involving other forex pairs, GBPUSD plunged 0.5% to 1.2159; EURUSD steadied at 1.1144; while USDCAD inched 0.1% higher to 1.3178.

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