Investing.com – The U.S. dollar rose on Wednesday, climbing to November highs ahead of the conclusion of the Federal Reserve’s latest policy-setting meeting.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 106.240, after earlier climbing to 106.380, close to the 106.51 which would be the highest since November 1.
Will the Fed see any rate cuts this year?
The final two-day meeting will conclude later in the session and rates are widely expected to remain at the high level of 5.25%-5.5%.
Progress toward the Fed’s medium-term inflation target of 2.0% has stalled somewhat recently, as evidenced by Tuesday’s release of the Employment Cost Index, which rose an annualized rate in the first quarter rose a high 4.2%, matching the increase in the fourth quarter.
This has led to futures markets pricing in a rate cut of just one quarter point by the end of the year, down from five at the start of the year, with this aggressive stance benefiting the dollar.
The main focus will be on what the chairman has to say at his press conference, especially since the bank will not update economic projections this time.
Investors will wait for clues as to whether the Fed still expects to cut rates sometime this year.
The euro calms down while inflation remains stable
In Europe, the price rose to 1.0669, trading in limited volumes while much of the European continent was on holiday.
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Data released on Tuesday showed it held steady at 2.4% in April, strengthening an already strong case for cutting rates next month.
The ECB has all but promised an interest rate cut on June 6, provided there are no nasty surprises in wage or price developments.
“The ECB Governing Council believes that if this inflation outlook is maintained, it would be appropriate to start reducing the current level of monetary policy tightening in June,” said De Cos, also head of Spain’s central government. bank, in Bank of America. The Spanish annual report Tuesday.
trading mostly flat at 1.2491, in subdued trading.
As things stand, money markets are currently pricing in a quarter-point rate cut from the Bank of England before the August 1 meeting – with roughly a 50-50 chance of a rate cut on June 20.
Yen retreats; need more intervention?
In Asia, yields rose 0.1% to 157.91, with the yen retreating even after likely government intervention led to a sharp recovery in the currency.
The pair is still far from its 34-year high of 160.245 at the start of the week, but Japanese authorities will be concerned that the yen appears to be retreating again, potentially forcing them to reopen the market. enter.
Other Asian currencies remained dovish amid a mix of Labor Day holidays and caution toward the Fed.
rose 0.2% to 0.6482, with the Aussie dollar pair strengthening ahead of next week’s meeting of the .
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The RBA may take a hawkish stance after stronger-than-expected inflation for the first quarter.
