Forex – Dollar Strengthens; Fed Meeting in Sight

© Reuters.

By Peter Nurse

Investing.com – The dollar pushed slightly higher in early European trade Tuesday, but ranges are tight as investors look to the next meeting of the Federal Reserve for guidance.

At 3:05 AM ET (0705 GMT), the , which tracks the greenback against a basket of six other currencies, was up 0.2% at 96.823, having dropped over 3% in the last month.

Last week U.S. jobs data for May caught markets completely off-guard with an unexpected increase in employment, and futures pricing now shows investors have abandoned expectations of U.S. rates dipping below zero next year.

Focus is now firmly on the Federal Reserve. It is not expected to change interest rate settings and investors are now weighing up the likelihood of stepped-up bond buying in the wake of the employment report.

“While the Fed may acknowledge the better jobs report, they are a long way from removing the liquidity punchbowl that has fuelled the rally in financial markets,” said analysts at ING, in a research note. “An unchanged FOMC statement with regards to asset purchases should allow the dollar to continue its bear trend later in the week.”

Elsewhere, traded 0.2% lower at 1.1272, showing limited weakness after data showed German slumped in April as the coronavirus crisis slashed demand for goods from Europe’s biggest economy.

The has been boosted by the European Central Bank’s move Thursday to increase its emergency bond purchase scheme to 1.35 trillion euros, more than had been expected.

The pair was down 0.3% to 108.09, edging lower after hitting a high of 108.55 to the dollar earlier in the session, a level not seen since early April.

Sterling has also weakened against the dollar Tuesday, with down 0.2%, but remaining around the 1.27 level.

 

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Source: Forex – Dollar Strengthens; Fed Meeting in Sight

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