Dollar halts before Federal Reserve meeting as traders avoided making big moves. Investors expect policymakers to cut interest rates for the first time since the financial crisis by 25 basis points.
U.S. Federal Reserve policymakers will not surprise markets if they deliver on expectations and cut U.S. interest rates for the first time in a decade on Wednesday.
The move would be a so-called insurance cut to protect the U.S. economy from global uncertainties and trade pressures. Markets will be watching the Fed’s forward guidance for clarity on whether the committee sees the cut as a one-off or as the beginning of a rate-cutting cycle.
It’s going to be a busy central banking week. The BOJ and Fed meetings will be followed by the Bank of England on Aug 1. It is expected to keep interest rates on hold as policymakers wait for the Brexit fog to clear.
Investors were worried over the U.S.-China trade dispute ahead of a highly anticipated Federal Reserve meeting. Meanwhile, U.S. and Chinese trade talks are shifting to Shanghai this week. Negotiators from both countries meet for their first in-person talks since a truce at G20 last month. Expectations are low for a breakthrough. Data on the weekend showed profits earned by China’s industrial firms contracted in June. This fuelled concerns that the bruising trade war will drag on economic growth.
June was the first full month of higher U.S. tariffs on $200 billion of Chinese goods.
START TRADINGForex – Dollar halts before Fed meeting
Money markets are convinced the Fed will cut the key benchmark rate by 25 basis points
The dollar halts near a two-month high on Monday. The dollar index was up 0.02% in afternoon trade at 98.027. Better-than-expected U.S. GDP data published on Friday had buoyed the index against rivals;
The Canadian dollar edged lower against its U.S. counterpart on Tuesday, hovering around a one-month low it hit on Friday.
The Japanese yen was last up by 0.21% at 108.54 yen per dollar. The Bank of Japan on Tuesday maintained its pledge to keep short-term interest rates at a negative 0.1% via aggressive bond purchases, as expected.
The euro hovered on Tuesday around the 26-month low it reached last week of $1.110. Although the Fed is expected to lower rates, U.S. yields will remain above those in the euro zone. This makes the dollar a more attractive investment for yield-seeking traders.
Sterling was the biggest mover in the foreign exchange market. It plunged to a new 28-month low of $1.212 on growing concerns on a no-deal Brexit.
Sterling was last down 0.33% at $1.217. It was also weaker against the euro by 0.37% at 91.54 pence.
In commodities, oil prices rose for a fourth day on optimism the U.S. Federal Reserve will this week cut interest rates. Brent crude rose 63 cents to $64.34 a barrel by 1127 GMT. U.S. crude was up 46 cents at $57.33 a barrel, but also set for a monthly decrease of around 1.8%.
Gold Prices firmed on Tuesday ahead of a U.S. Federal Reserve meeting. Spot gold was up 0.1% at $1,428.61 an ounce by 1143 GMT and U.S. gold futures gained 0.6% to $1,428.60. Silver rose 0.1% to $16.47.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money