This week the main attention of traders will be directed to the US dollar, which at the end of last week, against the leading world currencies, nevertheless regained the losses incurred earlier and reached the level of 90.50. To date, the dollar index has slightly decreased its positions - to the level of 90.41.
The dollar was strongly supported on Friday by the publication of data on consumer sentiment in the US, which showed an unexpectedly high rise in the consumer confidence index in June - from 82.9 to 86.4 points. In addition, the latest US inflation report showed that consumer prices in the country rose by 2% over three months, which is quite expected given such a high annual inflation rate of 8.2%.
Dollar in anticipation of the Fed meeting
The foreign exchange market on the eve of the Fed meeting is obviously becoming more and more vigilant. The future fate of the US currency depends on the Fed's meeting scheduled for Wednesday. Weak data on consumer spending and employment in the US hints that a rollback of QE this week is unlikely. In case of signals from the Fed to maintain a soft monetary policy for some time, the dollar will not find any trump cards in its pocket and will definitely sag. Greenback depletion will trigger a rally in the stock market and push up other currencies that are paired with the dollar in value.
At the same time, the central banks of many countries are already cutting back on the asset repurchase program, thereby implementing a tightening of monetary policy. And this despite the fact that the pace of recovery of their economies is currently lagging behind the United States. Similar decisions are expected from the Federal Reserve, but the regulator deliberately does not notice serious price pressure, although the growth of the consumer price index in the United States for the first time in the last ten years jumped to 5%. The inflationary pressures we feel in the United States today are not observed in almost any developed country. And while the Fed hopes that overpriced food and car prices will gradually begin to decline, there is a strong likelihood that these hopes will not materialize, because enterprises are eager to cover all the income lost during the quarantine period.
If at Wednesday's meeting signals are sounded about the readiness to turn the US policy towards tightening, then the greenback's position will take a leading position among other currencies, and this status will exist as long as the central banks of other countries do not join this trend. It is obvious that emerging market currencies will experience strong pressure during the strengthening of the dollar.
So far, market participants have not yet reached a consensus on the QE rollback, but the release of the US retail sales report scheduled for Tuesday will slightly open the veil and define expectations.