September 20, 2021

What Happened To The US Dollar Ahead Of The Fed Meeting?

 The U.S. dollar strengthened to a three -week high on Friday driven by better -than -expected positive U.S. retail sales data on Thursday. This leads to an indication that the probability of a reduction in asset purchases by the Fed before the end of the year.

The US dollar index, which measures major currencies against six major currencies, rose to 93.094, the highest reading since late August, up 0.2% at 93.062.

The Fed will hold a two -day policy meeting next week, where it will give more indications on monthly bond purchases.

According to market analysts will focus on the FOMC meeting next week to get more indications on tapering and interest rates. Tapering will typically push the U.S. dollar to strengthen as it carries an indication that the Fed tends to implement tighter monetary policy.

Speculation about tapering this year increased after U.S. retail sales. unexpectedly increased in August, data showed on Thursday, up 0.7% from the previous month despite expectations of a 0.8% decline.

University of Michigan consumer sentiment for September rose higher to a reading of 71 compared to the final reading of 70.3 in August.

The British pound fell 0.2% to $ 1.3758 following expectations of UK retail sales. Meanwhile, the euro declined 0.2% to $ 1.1743, having hit a three -week low of $ 1.1741 at the start of the New York session.

The currency market as a whole didn’t change much on Friday as investors weren’t inclined to bet ahead of next week’s important central bank meetings namely the Fed, Bank of Japan and Bank of England.