Monday’s trading session saw a firmer US dollar with cable (GBPUSD) breaking below the $1.15 handle and EURUSD trading into the 0.98 cents. Markets are beginning to position themselves for Wednesday’s Fed announcement. Whilst the outcome of a 75-basis point hike is widely expected, many are wondering whether Powell will offer some less aggressive tones which may tee up a potential pivot at December’s meeting.
The greenback has been on a strong bull run this year, gaining well over 10% against many of the major currencies. Whilst the Fed could be about to take its foot off the gas monetary policy-wise, it does not mean there will be an immediate shift outside of the world’s reserve currency. On the assumption the global economy is veering towards recession, the safest place to park money will be in the US dollar. As a result, the buck may continue to strengthen across the remainder of this year and well into 2023.
Written by Viv Savani. 6:27am, November 1st 2022
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