Dollar in the spotlight ahead of major Fed meeting

David Hobart

The US dollar looked set to trade at its highest position in over two months on Monday morning before the US Federal Reserve meet to decide the fate of interest rates in the world’s largest economy.

It is now widely expected that the Fed will cut rates when it meets later in the week.

The meeting, which will take place early in the week and which will end on Wednesday 30th October, is also expected to announce that there is a general aversion to cutting rates in the future, however – which could also impact what the effect on the dollar might look like.

Overall, markets appear to have accepted the rate cut and priced it in already.

In further central banking action news, the Bank of Japan is also set to meet in the coming days.

It is understood by analysts that this particular central bank is likely to move towards not changing policy – although the outcome has not yet been decided.

In its pair against the Japanese yen, the US dollar rose above some of this uncertainty and concern by trading at 108.72 yen.

This was almost at its highest point since early August, which was 108.94 yen.

The dollar also managed to do well in its index.

The index is an artificial tool designed to help traders ascertain how the greenback is doing compared to several other major world currencies.

It was seen at 97.882 here.

After a week of both Brexit uncertainty and European Central Bank action, the euro suffered in its pair against the dollar.

The dollar was seen at a relatively high point of $1.1084 in this pair.

Elsewhere, the pound spent early on Monday awaiting news from the European Union on the future of the Brexit process.

It was confirmed on Monday morning that the European Union would grant Britain what is described as a “flextension” until the end of January 2020, although this can be broken if a deal if ratified earlier.

The pound was seen to go down by almost one-fifth of a percentage point in its pair against the US dollar.

It was seen at $1.2815 at one stage.

In its pair against the euro, it also went down – although by much less, this time to 86.48.

The next hurdle for the currency will be whether or not Boris Johnson will be able to call a general election to resolve what is perceived by some to be an impasse in the Brexit battle.

The opposition Labour Party has been insisting that Johnson removes the threat of “no-deal” altogether before it agrees to this.

However, other opposition parties are now believed to be combining forces to help the Prime Minister amend the law that requires him to have the support of two-thirds of MPs.

China was celebrating an announcement from the office of the US Trade Representative late last week.

That office claimed that the early stages of a trade pact between the US and China could be on the verge of being confirmed.

The offshore Chinese yuan was seen at its best performing stage since mid-September in its pair with the US dollar.

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