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Dollar dominates ahead of Fed announcement

Dollar dominates ahead of Fed announcement

We can see that investors are buying Dollars ahead of Wednesday evening’s Federal Reserve monetary policy announcement, as evidenced by the Dollar making ground against all its peers yesterday. Although no rate hike is expected this month, there is a good chance that Janet Yellen will say that a 2016 rate hike remains on the table.

In light of recent easing by the European Central Bank (ECB), the mere prospect of higher U.S. rates has attracted flows into the Dollar and this trend should continue. Today U.S. retail sales is due and according to the International Council of Shopping Centers, consumer spending growth slowed in the month of February. The recent decline in wages does not support a pickup in spending which may explain why economists are expecting retail sales to fall by their largest margin in a year.

There is no significant data today in Europe – forex markets will be dependant on overall market sentiment for any volatility. The Euro traded sideways against Sterling yesterday, ending the day slightly lower at 1.28681 and this downward trend has continued this morning. Against the Dollar the single currency appears to have settled in the 1.11 area as traders contemplate, having soared last week to its highest level in a month. This move was after last week’s ECB monetary policy announcement, where the central bank aggressively boosted stimulus, but highlighted that negative deposit rates will not be lowered further.

Sterling struggled yesterday to regain the strength seen at the end of last week against the Dollar. GBPUSD failed to push back above 1.4400 as it moved steadily lower into 1.4250 territory. ‘Brexit’ made a reappearance in the news as a Telegraph poll showed that the “Leave” campaign would win on 52%, further decreasing the strength of Cable. There is no data out today for the UK ahead of tomorrow’s latest earnings data and the annual budget release.

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