The Dollar will strengthen; Fed meeting in view

By Peter Nurse

The dollar has slightly increased in the beginning of the european session on Tuesday, but the ranges are tight as investors await the next federal Reserve meeting to get advice.

At 10.30 am, the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 96,823, after having fallen more than 3% last month.

Last week, the data on employment in the United States for the month of may took the markets completely by surprise with an unexpected increase in employment, and the prices of futures contracts now show that investors have abandoned their expectations of see the us rates going below zero next year.

The focus is now on the federal Reserve. We do not expect that it modifies the parameters of the interest rate and investors evaluate now the likelihood of increased bond purchases in the wake of the employment report.

“While the Fed acknowledges that the employment report is better, it is far from having removed the punch of the liquidity that has fueled the recovery of the financial markets,” said analysts at ING (AS:INGA) in a research note. “A statement unchanged from the FOMC regarding the purchase of assets should allow the dollar to continue its downward trend later in the week.”

Elsewhere, the EUR/USD fell 0.2% to 1,1272, showing a weak limited after data showed that German exports fell in April, the crisis of the coronavirus that has reduced the demand for goods from europe’s largest economy.

The euro has been boosted by the decision taken on Thursday by the european central Bank to increase its bond purchase program of the emergency to 1.35 trillion euros, more than expected.

The pair USD/JPY declined 0.3 % to 108,09, after having reached a peak of 108,55 earlier in the session, a level not seen since early April.

The pound sterling also weakened against the dollar on Tuesday, the GBP/USD has fallen by 0.2 %, but remaining around the level of 1.27.

Like this post? Please share to your friends:
Leave a Reply