Fed’s bond buying program is likely to trigger interest rate hikes
The US Dollar Index is dropping back during early Thursday trading, after hitting a fresh high for the year during the previous session. The release of the latest FOMC minutes on Wednesday provided an insight into the views held by senior US monetary policy makers, with a prevailing stance supporting the acceleration of the tapering of the central bank’s asset purchase program. This urgency in slimming down the Fed’s bond buying program is likely to trigger interest rate hikes earlier than previously expected; a scenario that is clearly supportive of the dollar, especially as other major central banks, such as the ECB, chose to adopt a more dovish posture.
Gold is clawing back ground in early Thursday trading, after hitting a multi-week low during the previous session. The US dollar, whose price maintains an inverted correlation with that of the precious metal, received a boost on Wednesday from the release of the latest FOMC minutes, which revealed appetite amongst senior Federal Reserve officials to speed up the tapering of the central bank’s asset purchase program. This dynamic is likely to bring forward the timing for the hiking of interest rates and with the greenback supported by a hawkish Fed, the price of gold is likely to remain under pressure.
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