Traders Hesitant to Make Moves in the US Dollar Ahead of FOMC
The US dollar is trading cautious on Tuesday, maintaining its slight gains ahead of the upcoming FOMC meeting that is due to start today, as markets wait to see how the central bank would react to the latest changes in economic outlook. At the time of writing, the US dollar index DXY is trading around 91.78.
While the Fed has previously insisted on continuing with its low interest rates and monetary easing for an extended period of time, the rollout of the COVID-19 vaccines have given some hope that the US economy could recover at a faster pace than previously anticipated. Traders are eagerly waiting to hear if the updated developments on the back of vaccine optimism will convince the Fed to change its dovish stance, if not now then at least soon.
Although, for now, the possibility that the Fed could change its mind remains low despite economists forecasting a more rapid pace of economic recovery. The US economy is expected to post a faster rebound on the back of the COVID-19 vaccine distribution program and the rollout of the latest $1.9 trillion COVID-19 relief package.
Against the Japanese yen, the US dollar is holding steady, close to the highest level seen since June 2020, and is unlikely to make considerable moves until the BOJ meeting later this week. The Euro is also trading mostly steady while the GBP has slid lower against the greenback after Germany, France and Italy suspended the use of the AstraZeneca COVID-19 vaccine over blood clot concerns.
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