Forex News

Dollar Pulls Back from Two-Week Peak as Market Awaits Fed’s Verdict

All eyes are on the U.S. dollar as it stepped back a bit on Tuesday, though still sticking around a two-week high. There’s a big anticipation in the air as everyone’s waiting to see if the Federal Reserve will give the go-ahead for an interest rate boost later today.

Just to give you the gist, at around 2:55 a.m. Eastern Time (that’s 6:55 a.m. Greenwich Mean Time), the Dollar Index took a tiny step back by 0.1% to 100.960. However, don’t let this small retreat fool you. It still managed to reach the 101.65 mark overnight, a peak it hadn’t seen since July 11.

But why the boost, you ask? It’s simple, really. U.S. consumers are feeling good. Confidence has reached a two-year high this July as prices simmered down a bit and the economy proved itself to be a sturdy ship, even in the face of increasing interest rates.

So, what’s the scoop with the Fed? It’s wrapping up its two-day powwow today and everyone’s banking on them okaying a quarter-point hike. If they do, it’ll be the 11th time they’ve hiked up the rates in the last 12 meetings.

The question on everyone’s lips though, is this the end of the line for the Fed’s hike-happy phase or can we expect more bumps on the road later this year? Well, we’ll just have to wait and see what Chair Jerome Powell has to say about that. You bet, his words will be dissected for any hints of what’s churning in the minds of the decision-makers.

The brainy folks at Goldman Sachs, though, think this could be “the last hurrah” of the Fed’s rate-raising spree. But, they reckon the Fed might still lean more towards the aggressive side than what the market predicts. Their biggest question mark? How strongly will Powell stick to his guns on the ‘slow and steady’ approach to hikes he talked up in June.

Meanwhile, in the old continent, the Euro managed to bounce back a tad from its two-week low. Trading at 1.1067, a smidge above yesterday’s low point. The European Central Bank is also expected to up the ante by 25 basis points on Thursday. However, there are whispers of doubt if they can afford to raise the bar again this year given the clear signs of the economy taking a bit of a nosedive.

The latest surveys on Monday show the eurozone’s manufacturing activity isn’t looking too rosy. Adding to the gloom, Tuesday’s German Ifo tells us that business morale in Europe’s big player took another hit in July, marking a hat trick of monthly dips. In response, Goldman Sachs had to adjust their shades and cut down their 2023 growth forecast for the eurozone, thanks to this less than stellar economic performance.

Down under, the Aussie dollar took a bit of a hit, falling 0.2% to 0.6776, as lower-than-expected consumer prices made betters think twice about the Reserve Bank of Australia’s likelihood of increasing rates.

Meanwhile, the GBP/USD remained steady as a rock, trading at 1.2898. The USD/JPY dipped a bit by 0.2% to 140.68, ahead of the Bank of Japan’s Friday meeting. USD/CNY, on the other hand, got a bit of a boost by 0.2% to 7.1513 as the excitement over more stimulus in China dwindled a bit, all in anticipation of the Fed’s decision. It’s certainly a nail-biter, isn’t it?

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button