Fed Tightening Expectations Pushes Dollar Higher

Barbara Zigah

News that the Fed intends to rein in its current ultra loose monetary policy sooner than anticipated has pushed the greenback to a 2-month high.

Dollar HighOn Thursday, the Federal Reserve Bank stated that with the Coronavirus no longer viewed as a constraint to the US economy it had revised its rate increase projections and will now begin the process of ending the emergency asset purchase program. Of the Fed officials polled, 11 members of the Federal Open Market Committee have said they expect to see at least two 25 basis points rate hikes by the end of 2023. In the present, the central bank intends to maintain a monetary policy that supports a recovery in the US labor market.

In Tokyo trading as of 9:51 am, the USD/JPY was trading higher at 110.2900 Yen, a gain of 0.05%; the pair has ranged from a peak of 110.336 Yen to a low of 110.170 Yen. The GBP/USD was higher at $1.3933, up 0.0646%, off the session trough of $1.39102. The EUR/USD was lower at $1.1906, down 0.0118%, off the session peak of $1.19159.

Aussie and Kiwi Data Better than Expected

The Fed's statement prompted some strategists to revise the greenback's outlook in the near to mid-term. Expectations are that the ongoing recovery in the global economy will tend to weaken the Dollar's strength. To that end, in Australia and New Zealand, the latest data suggests further improvement in the economy. New Zealand's 1st quarter GDP was significantly higher than expected at 2.4% against a forecast of 0.9% (annualized) and 1.6% against a forecast of 0.5% (quarterly basis). In Australia, economists had called for the seasonally adjusted employment change for May to come in at 30K while the data showed 115.2K. The AUD/USD was trading higher at $0.7553 while the NZD/USD was higher at $0.7007.   

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.

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