The U.S. dollar is slightly weaker this morning but moves have been muted as traders across asset classes await this afternoon’s Federal Reserve decision.
Overview
The consensus is that the Federal Open Market Committee will accelerate the tapering of its stimulus, completing the removal of the emergency bond-buying program in March of next year.
The FOMC will also release the forecast of individual policymakers, or the so-called “dot plot.” Most expect the Fed to indicate it will boost rates twice during the course of 2022 to combat the hottest inflation in four decades.Fed Chief Jerome Powell will hold a press conference at 2:30 p.m., half an hour following the monetary policy decision. We expect heightened volatility from 2 p.m. onwards.In the meantime, there is fundamental data for traders to chew on. Advanced retail sales underperformed, registering at 0.3% in November and missing 0.8% estimates. Most of the subcategories including Retail sales excluding autos, failed to meet estimates. On a brighter note, the New York Fed Empire Index Rose to 31.9, beating a median estimate of 25.0.
What to Watch Today…
- Fed Decision at 2 pm; Powell at 2:30 pm
WOW, IT’S A ‘FOUR-PEAT’ | Top MXN Forecaster for Last 4 Quarters
Bloomberg ranks Monex for MXN, G10 Currencies, and NZD! Learn More
AUD
During a quiet overnight session, the Aussie’s 0.3% gain versus the greenback is the standout performer. The rebound essentially wipes out the Aussie’s 0.4% decline yesterday. The slight move higher comes on optimism over a narrowing budget deficit. The deficit is expected to be forecast at 76 billion AUD, 30 billion AUD better than the mid-year predicted shortfall. A slow news day ahead of the Fed, indeed.
GBP
The British pound continued to pick itself up off YTD lows versus the U.S. dollar. GBP/USD climbed 0.2% and touched a week high. U.K. inflation surged to the highest level in more than a decade last month and coming in higher than the Bank of England expected. The Bank of England will meet tomorrow. Earlier projections showed the central bank finally raising interest rates after failing to do so over the past few meetings. However, the threat of Omicron and government restrictions has caused traders to bet the central bank will hold its current policy in place this week. This morning’s inflation data will put added pressure on the BoE to make more aggressive moves in the new year.
Ready to spin the currency market moves in your favor?
Discover HOW WE Can HELP You SEND or RECEIVE PAYMENTS
