US Dollar Flexing Muscles Ahead Of The Fed’s Decision

FXOpen

The US dollar ended the previous week with a bang, rising to new heights and outpacing its main peers. The new trading week saw a continuation of this march of triumph.

Meanwhile, investors are preparing for what may prove to be the Fed meeting of the year. On Wednesday, the Federal Reserve is expected to announce the tapering of its asset purchases, a move already communicated to markets via its forward guidance model.

Yet, even with this information in mind, it is quite hard to predict the market’s reaction. One of the things that bring uncertainty is the dot plot.

Fed members are required to project the federal funds rate for the years ahead. The sum of their forecast is displayed on a chart in the form of dots. The number of rate hikes and, more importantly, their timing is what affects the way the financial markets move. Should the Fed members reveal an unexpected hawkish outlook, the dollar may grow even stronger.

Risk-Off Sentiment Dominates

Ahead of the Fed’s meeting and outcome announcement, a risk-off sentiment seems to be dominating the markets. Evergrande, a Chinese property developer, is on the verge of collapsing, and the government has no intention to bail the company out. The big question for financial market participants is: Will the collapse of Evergrande have an impact on the international financial system, or will it end up being a local event?

In any case, part of the US dollar’s strength rides on the back of lower equities in the States. Moreover, futures markets are showing renewed weakness at the start of the trading week, so the dollar's growth prospects are good.

All in all, this trading week will be packed with political events (i.e., Canadian and German federal elections) and central banks’ decisions (i.e., Federal Reserve, Bank of Japan, Bank of England, Swiss National Bank, etc.). In other words, volatility is guaranteed to reach new record levels.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Weekly Market Wrap With Gary Thomson: UK100, USD, GOLD, OIL Weekly Market Wrap With Gary Thomson: FTSE, NZD/USD, USD, USD/JPY Weekly Market Wrap With Gary Thomson: NIKKEI-225, USD/JPY, GBP/USD, USD/CAD, Gold Weekly Market Wrap With Gary Thomson: S&P500, USD, SNB, TSLA A Yen For Volatility: US Dollar Surges as Japan Ends 8 Years of Negative Rates

Latest articles

Anchored VWAP and How You Can Use It in Forex Trading
Trader’s Tools

Anchored VWAP and How You Can Use It in Forex Trading

In the world of forex trading, understanding the nuanced tools at your disposal can significantly enhance decision-making processes. One such sophisticated tool is the Anchored Volume-Weighted Average Price (Anchored VWAP), which refines the standard VWAP by allowing traders to set

Shares

META Share Price Collapses after Publication of Quarterly Report

Just yesterday, META's stock price closed at USD 493.50, up approximately 40% since the start of 2024 and up nearly 300% since the start of 2023.

However, following the release of Meta's quarterly report, its shares plummeted to USD

USD/JPY Analysis: The Rate Exceeds The Level of 155 Yen Per US Dollar

Today, the price of USD/JPY once again renewed its 34-year high, exceeding the level of 155 yen per dollar, which put pressure on the current authorities.

According to Reuters, officials are trying to maintain calm in the market.

"We

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.