US Dollar Waits For FOMC. President Biden’s Speech Today
Early on Wednesday, traders are cautiously waiting to hear the outcome of the latest FOMC meeting and remarks from President Joe Biden, who is scheduled to speak later in the day, before making their moves in the US dollar. At the time of writing, the US dollar index DXY is trading around 91.09.
While the dollar’s weakness has been driven by rising expectations for the Fed to continue with its dovish policy for an extended period of time, there are some analysts who expect more room for bullish moves in the reserve currency going forward. Their optimism towards the greenback has been driven by hopes for inflation to heat up as the economy recovers, which could force the Fed to tighten its monetary policy sooner than anticipated; although, the central bank has repeatedly played down the effects of high inflation.
Inflation expectations among investors, calculated from analyzing US’s inflation-linked bonds, climbed to more than 2.4% during the previous session, touching the highest level seen in almost eight years. This raises the possibility for inflation to go well above the 2% level, and if inflation does go on to touch such high levels, it could require the Fed to intervene with some measures.
While the Fed is widely expected to hold its monetary policy steady and offer no surprises, the US dollar could experience some volatility later today from an upcoming speech by President Biden. Markets are anticipating that Biden could announce higher capital gains taxes and target wealthier citizens with tax hikes to pay for his stimulus plans and revive the American economy.
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