U.S dollar struggles above two-year low, with all eyes now on U.S Federal Reserve

The U.S dollar struggled to stay above its two-year low during London’s trading session on Wednesday, upon growing concerns about the world’s largest economy. In the meantime, many currency traders are looking up to the almighty US Federal Reserve for some hope. Officials of the Federal Reserve are scheduled to meet later today.

What we know: The U.S. Dollar Index, which tracks the greenback against a list of other major currencies, gained slightly by 0.01% to trade at 93.650 at the time of this report.

The U.S Fed is expected to strike a dovish stance at its policy scheduled today, meaning more stimuli to an already bloated global financial system; it could perhaps open the door for higher inflation. These expectations would most likely increase the U.S dollar’s bearish run.

Quick fact: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc. Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay fewer dollars in fulfilling such payment obligations.

Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics discussed the present macros helping the dollar remain relatively stable. He said:

“The US dollar is enjoying a brief respite from the constant selling seen during July with the faltering gold rally offers one excuse for the pause.

“Ultimately, if the Fed holds the door open to dollar weakness, currency traders will more than oblige them as there will be a stampede to the entrance as currency traders will sell the dollar given the nascent signs of US cyclical economic weakness in July even more so as an early signal that EU economic stabilization is showing up in the data and will give more than ample cause to sell the buck.”

However, currency traders remain optimistic that the U.S Federal Reserve will bring some sanity in these high volatility readings recorded in currency markets recently.


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