FOREX
It’s Fed decision day, and the dollar remains subdued in relation to other major currencies. The greenback has been on the back foot since the previous session following the release of lower-than-expected US inflation figures. With consumer prices rising at a slower-than-predicted pace, the Federal Reserve’s monetary tightening is starting to achieve the desired results. It is true that 4% annual inflation is still well above the 2% target, and a resilient labour market creates some space for further rate hikes. However, the full impact of monetary tightening usually takes months to be felt in its entirety. So, with May CPI figures coming in lower than expected, the consensus is that the Fed will pause in June and that further hikes this summer are now less likely than they were only a few weeks ago. Against this background, and with other central banks, such as the ECB and BoE, at an earlier stage in the tightening cycle, there is scope for further dollar weakness.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
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