On Monday, June 14, USD was hugely steady in early European trade as traders are showing caution since the US Federal Meeting is approaching this week.
The greenback had some increase last week after the release of the US consumer price index which spiked 5.0% year-on-year in May.
This is its highest peak in more than a dozen years which raised fears that the Fed will be forced to implement its monetary policy sooner than expected.
However, that progress was only limited since many in the markets seemed to believe policy makers’ repeated statements that inflation is transitory.
The USD/JPY, GBP/USD, and AUD/USD all climbed 0.1% to 109.76, 0.1% to 1.411, and 0.1% to 0.7711
Meanwhile, EUR/USD plummeted to 1.2104, after reaching an almost one-month low of 1.2093 in the previous session.
Elsewhere, USD/RUB traded 0.4% higher to 72.0205, even though Russia’s central bank increased its key interest rate to 5.5% or 50 basis points last Friday.
The central bank’s main area of responsibility, which is the annual consumer inflation, rallied to 6.0% in May.
In addition, USD/TRY rose 0.1% at 8.3885, after Turkey signed a new $3.6 billion swap treaty with China last Sunday.
This raised the limit on their ongoing arrangement to $6 billion.
China’s arrangement with Turkey allowed the latter to boost the trade in its local currency and avoid using US dollars, which supports the central bank’s reserves.
Meanwhile, the US dollar index which trails the greenback in opposition to its rival currencies sank at 90.483 following a gain of over 0.5% last week.
Federal Reserve Meeting
An analyst stated that the Federal Reserve might be forced to moderate the overshooting of an inflation target, however, it won’t be convinced of sustained pressure this month.
Last month, employment rose 559,000 but the central bank may not move this week as Fed officials are close on narrowing its asset-purchase program.
A survey recorded that 40% of investors are expecting the Fed to make its first move in tapering its current $120 billion monthly purchases in late August.
Another 24% expects to see that event happen in the following month.
On Tuesday, the US central bank started a scheduled two-day policy meeting.
Based on recent data, a surge in inflation increased concerns over price pressures after the post-COVID-19 economic resumption.
This could oblige policymakers to an early tapering of currency depreciation stimulus.
Meanwhile, some expect the Fed to remain on hold until 2023.
However, some believe that the fluctuations of the USD will proceed in recent days.