Dollar Faces Strain in Forex Markets as Federal Reserve Issues Warnings

James Randall

dollar notesThe US dollar came under strain as trading began on Monday following a warning from the Federal Reserve that economic growth could be on the wane.

The comments, made by the new Federal Reserve vice chair Richard Clarita, said that growth around the world could be at risk of plummeting, and that “that’s something that is going to be relevant” for the US.

The Federal Reserve has been seen as generally positive about the outlook for the American economy, and traders have interpreted that as a sign that there will be interest rate rises on the horizon.

As a result of the added uncertainty caused by Clarida’s comments, though, the dollar index, which tracks the value of the greenback in relation to several other major currencies, dropped by 0.5% as trading closed last week.

As early trading began on Monday, it was the other global currencies which did well. The euro, for example, was able to hold its ground in the EUR/USD pair as Asian trading kicked off, and it hovered at around $1.1411.

There’s a whole week of activity on the horizon for foreign exchange traders this week, meanwhile.

Today sees a monthly report from the German Bundesbank central bank. The time of this item’s release has not been specified.

At 10am GMT, European construction output data for September will be released.

At 3pm GMT, US housing market index information from the National Association of Home Builders will come out. This is expected to hold steady at 68.

Looking ahead to Tuesday, there’ll be several significant central bank moves during the night in the GMT time zone.

At 2am GMT, for example, the Bank of Japan will release its monetary policy statement. While at 12.30am GMT, the Reserve Bank of Australia will publish the minutes of its latest meeting.

Later on Tuesday will be an autumn forecast statement from the British Treasury. This twice a year forecast, which is due out at 10.35am GMT, will look at the government’s budget over the course of the next 12 months as well as other metrics, like borrowing levels.

On Wednesday, the UK’s public sector net borrowing for October will be revealed too. It was last recorded at well over £3 billion.

At 11.30pm GMT, Japan’s national consumer price index for October will be released. Excluding fresh food, the year on year change was previously recorded at 1%.

The US dollar market may be somewhat slower on Thursday due to the Thanksgiving holiday. One of the two main events that day will be the British inflation report hearings by the House of Commons Treasury Committee, which currently does not have a designated time slot.

At 12.30pm GMT, the European Central Bank will reveal the accounts of its latest monetary policy meeting.

On Friday, Japanese yen markets may slow down due to the Labor Thanksgiving Day holiday, which will see banks close.

However, other countries, such as Canada, will be very active. A whole host of Canadian data releases will come out at 1.30pm GMT, including retail sales data for September and the consumer price index for October.

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James Randall
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