Kantox currency update: US dollar bid awaiting the Fed’s decision
The dollar has been trading higher against its main peers over the last sessions, with the market relatively steady after the Trump-Kim summit and with the investors focusing on the conclusion of the last monetary policy meeting by the Federal Reserve.
The Fed is widely expected to hike rates from the current 1.75% to 2% and therefore, the investors’ focus will be on assessing whether the bank will stick to its initial plan and hike rates one more time this year or might consider the possibility of accelerating its monetary policy normalisation cycle.
EUR/USD: dives further away from 1.1800. The euro lost ground on Monday amid a broad-based dollar strength, to retreat further away from last week highs at 1.184, reaching session lows at 1.1730. As at London market opening times, the EUR/USD is trading at 1.1740.
GBP/USD: one-week lows at 1.3340. The pound remains biased lower, with signals of a soft patch in UK economy dampening the expectations of a BoE rate high, while the differences within the UK cabinet about the Brexit reactivate concerns about the possibility of a “hard Brexit”. As at London market opening times, the GBP/USD is trading at 1.3360.
USD/JPY rallies to 3-week highs above 110.50. The dollar extended gains on Tuesday, to reach levels beyond 110.50 on the back of Trump-Kim’s summit and the investors’ expectations about a Fed rate hike today. As at London market opening times, the USD/JPY is trading at 110.60.
In the Calendar Today
In the UK, the UK, the Consumer Prices Index will offer an insight into UK inflation trends. UK CPI has been retreating over the last months, which has hindered BoE’s monetary tightening plans, at the same time weighing on the pound. In that sense, another decline on the CPI might add negative pressures on the GBP.
Today all eyes will be on the Fed’s monetary policy meeting. With the market already discounting an interest rate hike, the focus will be on the ensuing press release. If the Bank does not hint at the possibility of more than one rate hike for this year, the market might react with disappointment and punish the dollar.
08:30 GMT UK: Consumer Prices Index (YoY) (Apr)
Previous: 2.1% Expected: 2.1%
18:00 GMT Fed: Interest rate decision
Previous: 1.75% Expected: 2.0%
18:00 GMT FOMC: Press Conference