The US Dollar Outlook: USD Price Action Focused on Federal Reserve Meeting is an analysis of USD movements in the face of this week’s scheduled Federal Reserve meeting. This report provides the most current information on currency movements based on the most recent Federal Open Market Committee minutes. Based on these minutes, it is not only expected that the Federal Reserve will continue to reduce its purchases of Treasury Bonds and mortgage-backed securities as it moves forward with its plan to raise interest rates, but it also expects a reduction in the size of its balance sheet, as well as a decrease in the level of its current-month Treasury bonds and mortgage-backed securities.
As a result of these expected developments, the USD price action of the US Dollar Outlook: USD Price Action Focused on Federal Reserve Meeting should move lower in anticipation of the upcoming Federal Reserve meeting. If this trend continues to prevail over the next two weeks, then it is likely that the Federal Reserve will raise its interest rates and eliminate its purchase program on short-term Treasury bonds and mortgage-backed securities. However, this is likely to have little effect on the value of the US Dollar Index, given the fact that it would be too late for the market to absorb the increase in the Federal Reserve’s balance sheet. However, this will likely cause the USD/TUSD pair to move lower.
Furthermore, the strength of the US Dollar is not expected to be affected by this anticipated change in the Federal Reserve’s monetary policy. On the contrary, this strengthening of the dollar may contribute to a boost in the domestic demand for U.S. goods and services, which is expected to further stimulate the economy. In addition, this increase in the domestic demand is expected to make U.S. dollar-denominated products more affordable in other countries, particularly in those where the purchasing power of the U.S. dollar is currently weakening.
In summary, the USD Price Action of the US Dollar Outlook: USD Price Action Focused on Federal Reserve Meeting highlights the potential downside risks of the current policy path adopted by the Federal Reserve, which is expected to lead to a further strengthening of the US Dollar over time. If this expectation proves to be correct, it is likely that the US dollar will weaken against other major currencies due to the reduced supply of U.S. dollars. However, if the market is successful in absorbing this change, then the impact on the U.S. Dollar Index is likely to be temporary, which means that the impact on the USD/TUSD pairs may be limited.
It is important to note, however, that the USD Price Action of the US Dollar Outlook: USD Price Action Focused on Federal Reserve Meeting is not intended to be used as a guide to timing the Federal Reserve’s change of course. and is not designed to be considered a recommendation to buy or sell any particular security.
This article is provided for general information purposes only. It should not be construed to be, in any way, a recommendation to buy or sell any security mentioned herein. No assurances can be made concerning results or future performance of this analysis. Nothing contained herein should be construed to have been reviewed or endorsed by any of the companies mentioned.
This article is a Trader’s Edge service and should not be used as investment advice. Please consult your financial advisor for professional financial advice regarding any aspect of investing.
Please email us with any questions regarding this article.