US Dollar (USD) Exchange Rate Softens in Anticipation of Federal Reserve Statements
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The US Dollar is due for a highly influential week this week by way of data releases and the Federal Reserve’s Federal Open Market Committee (FOMC) meeting on Wednesday to discuss monetary policy.
Speculation is engulfing the US economy with forecasts that the second quarter proved to be less fruitful than previously envisaged causing the Dollar to dip.
Foreign exchange expert Lee Hardman commented: ‘Expectations are we’ll see rebounding growth, but the risks are somewhat tilted to the downside. That’s triggering some caution in long-Dollar positions.’
However, despite a glitch in the US Dollar rally on Monday, expectations for the ‘Greenback’ to continue gaining are still prominent.
An expert in the field Petr Krpata commented: ‘We expect Dollar strength to unfold. We are going to see divergence in monetary policy. In the US it will be slowly and surely towards eventual rate hikes. We are going to see a rise in short-term US yields and this should bode well for the Dollar.’
Monday saw the release of US Markit Composite and Services PMI along with Pending Home Sales figures. Composite PMI reached 60.9 in July, a fall from June’s 61.0; meanwhile Services PMI in July remained the same as in June at 61.0, despite being forecast to fall to 59.8.
Furthermore Pending Home Sales figures reached -4.5% in June, bypassing the forecast of -5.2% and May’s -6.9% figure.
Whilst Tuesday will release influential Consumer Confidence data, Wednesday will prove to be a highly significant day for the US with the FOMC decision.
Although interest rates are currently predicted to remain at 0.25%, the result of the meeting could prove enlightening, following Chairwoman for the Federal Reserve Janet Yellen’s considerably more hawkish remarks as of late with regards to rate hikes.
Furthermore the US will see Mortgage Applications figures, alongside Employment Change and Gross Domestic Product data which could all boost the ‘Buck’.
The US economy is eagerly awaiting interest rate hikes which Yellen suggested would take place following encouraging employment data.
Moreover, Wednesday will see the Fed Pace of MBS Purchase Program decision alongside the Fed Pace of Treasury Purchases announced which will be highly significant for the US Dollar exchange rate.
The US Dollar is expected to fall ahead of such influential Federal Reserve statements this week, however; with such influential data releases and speeches, the US Dollar could be placed back on its upward trajectory.