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Dollar Stabilizes Ahead of Federal Reserve Meeting

ForexJul 27, 2021 09:06
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By Peter Nurse - The dollar traded marginally higher Tuesday, stabilizing below recent highs ahead of the start of the latest U.S. Federal Reserve meeting which could provide clues of future policy action.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.703, just below last week’s 3 1/2-month high of 93.194. 

USD/JPY fell 0.2% to 110.16, GBP/USD edged lower to 1.3812, EUR/USD was 0.1% lower at 1.1789, while the risk-sensitive AUD/USD fell 0.2% to 0.7365.

Trading ranges are likely to be small Tuesday at the start of the two-day meeting of the Federal Reserve, concluding on Wednesday. There isn’t expected to be a change in policy at this meeting, but traders will be looking for any discussions about the timing of the removal of the central bank’s bond purchases as well as the members’ thinking over the current elevated inflation levels.

“An interesting early autumn is upcoming with decisive tapering decisions to be taken within the Fed and the ECB. We find that the scope for an aggressive tapering process is better in the U.S. compared to the Euro area, as the economic comeback has simply been (much) swifter in the U.S. We hence see a stronger USD on the cards,” said analysts at Nordea, in a note.

Elsewhere, USD/CNY edged lower to 6.4798 after profit growth at China's industrial firms slowed for the fourth straight month in June, climbing 20% year-on-year in June after a 36.4% increase in May.

The pair has risen around 0.4% over the last month with the yuan weighed by a Chinese regulatory crackdown as well as China reporting the most Covid cases on Monday since the end of January. 

EUR/HUF rose 0.1% to 361.53 and USD/HUF rose 0.2% to 306.58 ahead of the latest meeting of Hungary’s central bank, which is expected to result in a second interest-rate increase in as many months to combat sharply rising prices.

Most analysts surveyed by Bloomberg predict the base rate will be lifted by 15 basis points from the current 0.90%, but some are looking for a larger increase.

Dollar Stabilizes Ahead of Federal Reserve Meeting

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