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Dollar at two-week high ahead of Fed meeting

While the greenback is on a high, central banks across the globe are taking action to alleviate the negative ripple effect from ongoing trade tensions.

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The Dollar has stuck to a two-week high against its major peers today, 17 June on strong retail sales in May.

This uptick suggests that consumer spending is picking up and the US economy could be in a better place ahead of the Federal Reserve’s meeting. Meanwhile, investors are betting the Fed will not cut interest rates this week, but it will pave the way for future rate cuts in light of increasing economic strains and trade tensions to bolster the world’s largest economy.

Economists expect the Fed will tilt its message towards lower rates, reduce its outlook for economic growth and acknowledge weaker inflation.

The Dollar Index, measuring the greenback against a basket of six major currencies, hardly changed, hovering at 97.479 after rising to 97.583 on Friday, 14 June – its highest since 3 June.

Central banks take action

Meanwhile, fears a protracted Sino-US stand-off could tip the global economy into recession have prompted rate cuts in a number of Asian countries, including Australia, India, Malaysia, New Zealand and the Philippines. The escalating trade war between the US and China has also rippled through global supply chains, having hit business investment, factory output and world growth.

The central banks appear to be taking action. In Europe, the European Central Bank has recently raised the prospect of more stimulus, while the Bank of Japan is widely expected to reinforce its commitment to its substantial stimulus programme.

In what will be a busy week for central banks, ECB President Mario Draghi will kick off with his speech today at 18:00 (GMT), followed by the Fed’s meeting and interest rate decision on Wednesday, 19 June, Then on Thursday, 20 June, the BoJ and BoE will announce their latest interest rate decisions.

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