U.S. Dollar up prior to big Fed announcement

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U.S. Dollar up prior to big Fed announcement

NOVEMBER 03, 2021

The U.S. Dollar is trading in tight ranges ahead of the much-awaited Federal Reserve decision and press conference at 2PM. 

Overview

The Fed is highly expected to announce a tapering of its bond purchasing and some speculate about the potential for getting some sort of timeline for interest rate hikes. That part would be a surprise to us from Fed Chairman Jerome Powell, who we feel will try to avoid setting any rate expectations for now.

Yields in the bond market have fluctuated plenty trying to price-in tightening from other central banks as well, but stocks remain elevated as strategists remain faithful to the economic growth to come and strong earnings merit a risk-on mood. The gap between 30-year treasuries and 2-year ones is shrinking as expectations of inflationary growth and rate increments support short-term rates.

Nevertheless, the global situation is blurring the long-term vision of growth since China is experiencing another widespread of the coronavirus. While true that much of the worries about the condition are fading as more public activity takes place and shipping docks work on getting out of a jam, the medical condition still largely affects travel and trade. We shall see where this month takes us as the challenges remain and the outlook for next year is affected.

What to Watch Today…

  • No major economic events scheduled for today

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EUR

The Euro has been moving in familiar ranges as the Fed gets ready to likely announce the first round of tapering its quantitative easing program. At the moment, plenty of data is being digested on their side of the Atlantic and ours, but Manufacturing figures are disappointing as Purchasing Managers Index were released for the Euro-zone earlier.

All nations, but Italy, disappointed. We shall see if the afternoon action drives the shared currency weaker as tapering is established while the European Central Bank allows more room before tightening.

GBP

Not much in terms of data out of the U.K. but the currency will certainly feel the news out of the Fed later. Additionally, today’s announcement and handling will help serve as a blueprint for what the Bank of England may do.

Revenue growth is important after years of low tax collection and the reality of post-Brexit trade remains items pressuring Sterling. Pound prospects for appreciation have been dimmed lately.

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