Ahead of a rate decision from the Federal Reserve Bank, cautious investors helped to maintain a steady momentum on the U.S. Dollar as FX traders speculate that the Fed will likely exercise a prudent stance as regards the timing of any potential interest rate hike. Traders are also awaiting confirmation that the Fed intends to announce the conclusion of the Quantitative Easing initiative, although the Fed had previously said that that was not a certainty, and given the condition of global growth and weak U.S. inflation, there is some speculation that the Fed could surprise.
As reported at 10:06 a.m. (GMT) in London, the U.S. Dollar Index was trading at 85.397 .DXY; the Index, which has lost nearly 0.4% on the week, is used to FX investors to gauge the strength of the greenback in relation to its weighted peers. The EUR/USD pair is trading lower at $1.2732, at the lower end of today’s tight trading band. The USD/JPY meanwhile edged lower to 107.97 Japanese Yen, a loss of 0.2%.
Fed Language Eyed
Markets expectations for the Fed decision are very dovish noted one currency strategist in London; that suggests that even a hint of hawkishness in the Fed’s language could give the greenback a lift. What will be watched very closely is the language used, especially as it refers to labor market slack.