The US dollar only recorded a slight strengthening ahead of a two-day policy-making meeting where the market expected that the Fed would announce the start of its massive asset purchase cuts implemented at the start of the Covid-19 pandemic.
Investors in recent weeks have taken precautionary measures for fear of a continuing surge in inflation. Today, the Reserve Bank of Australia (RBA) has announced a more dovish tone than investors expected. This has prompted the depreciation of the Aussie currency.
The Fed will announce its policy decision early Thursday morning and then be followed by the Bank of England on the same day.
Edward Moya, a senior market analyst at Oanda argues that uncontrolled inflation has prompted the central bank to take critical steps despite not being ready.
The US dollar index, which measures the greenback against major currencies, strengthened slightly by 0.13% to a trading level of 94.050.
The market is now waiting for more indications on when the central bank will start raising interest rates. For Moya, ‘The Fed has the potential to do a better job than the ECB in raising rates’. He added that he expected there was a possibility that bond yields would increase but the US dollar could depreciate.
The Australian central bank did not exhibit the hawkish tone many expected, causing the Aussie dollar to fall 0.9% to $ 0.7452, the weakest rate since 19 October.
The sterling depreciated 0.27% against the US dollar to $ 1.3626, ahead of the Bank of England meeting Thursday, where the market expected an interest rate hike. The Euro remained depreciated against the US dollar by 0.21% to the exchange rate of $ 1.15825.
The market is now focusing on reports from the Central Bank for more indications.
