It is Fed day, and everyone’s base case scenario entails the announcement of a 75-basis points rate hike
The US dollar is losing ground to other major currencies during early Wednesday trading. It is Fed day, and everyone’s base case scenario entails the announcement of a 75-basis points rate hike later today. This increase will take the Federal Reserve’s fund rate to 4%, the highest level since 2007. However, the move has been expected and it is already baked into the value of the greenback, so today the markets will be looking beyond it and focusing on what comes next. In its pursuit of lower inflation, the US central bank risks causing considerable damage to the economy, so many observers now expect it to start telegraphing the shift to a less assertive stance. The FOMC press conference will be closely scrutinized by investors anxious for hints over the beginning of the end of the current cycle of monetary tightening. The relative dollar weakness of the last 24 hours could be a sign that some traders have already started to price in a Fed pivot.
Ricardo Evangelista – Senior Analyst, ActivTrades
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