The US dollar strengthened on Tuesday after US Treasury yields surged to two-year highs. The dollar index climbed 0.5% to 95.749, the biggest daily increase in two weeks.
Earlier in the month, the greenback was held back due to persistent inflation and the US-China trade conflict.
Market awaits Hawkish Fed
The first Fed meeting of the year will be held next week. Consensus expect that the Fed will announce its first interest rate hike in March and there will be four rate hikes in total this year. Stay alert and watch the news closely
And there might be Hawkish surprises. Fed official Patrick Harker said earlier that he is open to more than three rate hikes this year to combat inflation. Powell also signaled a tighter monetary policy would be needed to make sure that inflation would not become “entrenched”.
Strengthening USD against major currencies
On Tuesday’s meeting, The Bank of Japan announced revising up its inflation forecasts but reassured not to raise interest rate or modify its loose monetary policy. USD/JPY rose to ¥115 overnight and slowly fell back and hovered around ¥114. Follow all the latest forex news here
Elsewhere, driven by the drop in the US stock market, the Euro slipped 0.7%, the biggest day decline in a month on Tuesday, and returned to its 50-day moving average. Even though Germany’s ZEW survey indicated a positive outlook for the country and exceeded expectations, it failed to halt the Euro’s slide.
Upcoming events that may affect the trend of USD:
- Jan 21 — US Existing Home Sales (Dec)
- Jan 25-26 — FOMC meeting