November 1, 2021

Critical Week for the FX Market! USD Remains Strong

 The early trading opening of the Asian session saw the US dollar rebound with trading at a 2 and a half week high against most major currencies.

The increase follows an increase in U.S. bond yields and the strengthening of personal consumption expenditure price index (PCE) data, which is typically the Federal Reserve’s (Fed) choice for measuring inflation.

PCE, excluding volatile food and energy component prices, rose 0.2% in September. On an annual basis, the core PCE price index rose 3.6% after a similar increase in the previous month.

This strong reading again boosted market optimism for the US central bank to raise rates earlier than expected.

At the time of writing, the dollar index that measures the strength of the greenback dollar traded higher at 94.16, not far from the highest level it reached at the end of last week.

This week’s focus is on the policy meetings of the FOMC, Bank of England (BOE), the Central Bank of Australia (RBA) and the US NFP jobs report that will bring about major movements in the currency market.

The euro erased gains from weak US economic data last week, causing it to trade weaker at 1.1558 against the greenback dollar during the Asian session.

While the pound also recorded a decline following the rebound of the US dollar, bringing it lower to trade around 1.3685 against the USD.

Against the yen, the US dollar traded stronger at a nearly one -and -a -half -week high following an increase in US 10 -year bond yields that rose to 1.7% before declining slightly to 1.57%.