Now that concerns over the potential currency war spurred on by China’s intervention in the Yuan have subsided, the markets’ focus has turned primarily to the US Federal Reserve Bank. Later this week, two key data releases will help solidify expectations of a possibly imminent interest rate hike; first will be the release of US inflation data followed by the Federal Reserve’s last meeting minutes. The Fed minutes, especially, provide clues as to the thinking or protocol of the various FOMC members. The US Dollar is already broadly higher ahead of the data releases, with the Dollar Index up now for three consecutive days.
As reported at 11:25 am (BDT) in London, the EUR/USD pair was trading lower at $1.10954, down 0.18%. The USD/JPY was higher at 124.5210 Yen, a gain of 0.21%. The AUD/USD was also lower at $0.7362, a loss of 0.24% for the Aussie. The US Dollar Index was trading at 96.692 .DXY, up 0.18%.
US Inflation Will be Key
Analysts point out that if the inflation data for the US is weaker than expected, it is likely to put the greenback under some pressure. The Fed might then consider postponing a rate hike until inflation approaches the Fed’s target. For the most part, expectations are high that the Fed will not back burner a rate hike and that the divergence of policy between the Fed and most of the other major central banks will continue to widen.
