Dollar Climbs as Policy Divergence Looms

The US Dollar Index edged higher today as it appears the divergence between the Federal Reserve Bank and its major peers will shortly widen. Investor expectations remain high that the Fed is on the brink of a rate hike, despite the softness in growth globally. The Dollar is also finding support against the Euro after comments were made by several ECB officials which hinted at more easing ahead, including further cuts into already negative deposit rates.

As reported at 10:53 am (GMT) in London, the EUR/USD was trading at $1.0735, down 0.18%. In today’s trading, the pair ranged from $1.0725 to $1.0767, a relatively narrow trading band for this favorite and volatile pair. The US Dollar Index was trading higher at 99.07 .DXY, a gain of 0.11%. Market players tend to use the Dollar Index to gauge sentiment for the greenback relative to its major rivals.

Look Ahead to Retail Sales

While the Fed has clearly hinted at a tighter policy, Friday’s retail sales data could be final piece of the puzzle to make that determination. Consumers are the driving force behind the US economy, and an improvement in retail sales will prove that the American consumer foresees a brighter economic future and thus is willing to spend money. Any disappointment in the figures could be seen as a possible setback and would weigh on the Dollar.

Barbara Zigah

After working on Wall Street, Barb began her second career as a freelance writer at Daily Forex, where the CEO recognized fresh, untapped potential and was willing to give her a try. She’s never looked back. Since then, she’s worked steadily as a freelance writer and editor in the financial services and Forex-related industry.