Many investors are watching the US Dollar closely as the Federal Reserve Bank of Boston releases their latest H.4.1 report on the US money supply. The report is specifically focused on the short-term interest rates and the money supply growth. Many investors are watching the report closely as the Fed seeks to tighten control of the US dollar.
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The USD exchange rate strengthened slightly this morning, as traders seemed to brace themselves for the forthcoming announcement by the US Federal Reserve that they will conduct another rate hike. While the US central bank has already signaled that a rate hike could take place at the end of this month, investors are still expecting a clear decision. The USD/JPY pair has been trading in the range of 102-104 since the beginning of the year, while the USD/CHF pair has been trading in the range of 0.733-0.743
- Interest rate increases and maturity reductions
- EUR/USD at new lows
- Markets sell off, but stable
The Federal Reserve and Chairman Jerome Powell concluded the two-day meeting with a press conference in which they were surprisingly candid about the economy’s current inflation problems and how they will be addressed. The answers received gave a boost to the US dollar market, citing both reduced bond purchases and higher interest rates. This brought the EUR/USD to its lowest level in two months and affected other global currencies against the dollar. When they heard the Fed Chairman’s comments, markets on Wall Street did fall, but it was not a sell-off that would have occurred under other circumstances if the message had not come across so clearly.
Double tariff increase planned for 2023
Part of the main message from the Fed meeting was that interest rates would indeed rise. This is not something that is expected to happen in the short term, but something that most currency market participants already consider inevitable. These rate increases are planned for 2023. None were planned in the past, but the latest projections say two will come in the same year.
Powell also noted that inflation expectations for this year have been raised. This figure now stands at 3%, reflecting a strong economic recovery which has also boosted employment and growth plans. While the reduction in bond purchases will not begin immediately, there was still room for that discussion.
dollar rises after resultsmeeting
As expected, currency traders benefited from increased demand for the US dollar, given the relatively optimistic outlook and analysis. As a result, the dollar index firmed to just below 92 in some timeframes, marking a new high for the index, which had fallen below 90 for extended periods.
At the same time, the euro was one of the currencies that took the hit. It fell below the 1.20 level for the first time since April, amid growing demand for the U.S. dollar. The news from the eurozone is in stark contrast to those in the eurozone who remain fully committed to their bond buying programme and believe it is premature to backtrack.
Wall Street falls, but not dramatically
The Fed’s admission that it needs to adjust its plans and that inflation is rising faster than expected could cause chaos on Wall Street on Thursday. However, that did not happen. Although the markets sold off after these comments, they were more restrained than many expected under the circumstances.
Many seem to have already realized the optimism and although all major indexes fell slightly, they did not fall victim to the sharp decline that had some market analysts worried before the session began. Attention will now turn to the first weekly unemployment claims in the United States.The U.S. Dollar strengthened against a backdrop of a stronger U.S. economy, higher oil prices, and a stronger U.S. Dollar. The US Dollar Index gained 0.6% to 97.50, while the U.S. Dollar Index gained 0.5% to 92.27. The U.S. Dollar Index has been strengthening since the end of last year, and has remained above 90 for the past several months. The U.S. Dollar Index is the dollar’s value against a basket of six major currencies. ~. Read more about why does the fed raise interest rates and let us know what you think.
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