US Dollar Stable Ahead of Key Federal Reserve Decision
The US dollar is trading sideways against its currency peers on Wednesday. Markets anticipate the Fed’s final meeting of 2021.
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Principal Points
- US dollar firm in the forex market as traders eye the Fed’s final meeting of 2021
- Fed Chair Powell to appear for a key press conference today, markets will be watching
What’s Moving in the Markets?
The US dollar is trading fairly unchanged against its peers in the forex market Wednesday morning. This said, the EUR/USD pair gyrates near 1.1275, relatively flat on the day. It’s worth noting that the pair is trading near an 18-month low as the greenback has been pushing higher this year.
More specifically, the EUR/USD is lower by about 8% in 2021, while other currencies have also been pressured by a stronger American dollar. The USD/CHF, for example, is up about 5.5% since January, while the USD/JPY is higher by over 10% for the year.
In that context, the US dollar today could experience increased volatility during the highly-important Fed meeting.
What’s the Big Picture for Traders?
The US Federal Reserve gathered for its two-day meeting yesterday. With this in mind, the meeting concludes today with a press conference by Chairman Jerome Powell. He is expected to close the meeting with remarks on the US economy and the Fed’s approach to it.
Moreover, the US central bank will announce its interest rate decision. While the rate is expected to remain unchanged, analysts say Mr. Powell could hint at a quicker rate increase. Previously, Fed policymakers have stated they plan to raise rates sometime in late 2022.
Now, however, strong inflation pressures could prompt the Fed to use its tools to bring back balance. More specifically, the Fed may choose to unwind its monetary support at a faster pace. In addition, the bank could decide to raise interest rates in early 2022 in order to cool down the economy.
Still, the Fed meeting today is likely to stir the financial markets, presenting opportunities for traders to enter.
What to Watch in the Markets?
Against that backdrop, stocks, gold, currencies, and cryptocurrencies could see elevated swings today. In particular, the Fed’s decision could determine the short-term direction of asset classes globally.
Stocks in the US, for example, turned lower for a second consecutive day on Tuesday. Investors were largely defensive, unwilling to take big risks ahead of today’s event. As a result, the Nasdaq Composite dropped 1% for the day, led lower by big tech names.
Tesla and Apple lost 0.8% each, while Google parent Alphabet and Netflix dropped 1% or more. In addition, Microsoft finished lower by 3.3%.
What’s Happening in Crypto Markets?
Cryptocurrency trading is moving sideways, similar to currencies today. Further, the price of bitcoin early Wednesday is pinned near $48,000, while Ether trades around $3,900 per coin.
Dogecoin outperformed major cryptocurrencies on Tuesday when Elon Musk released a single tweet. In his message, the billionaire chief executive said Tesla plans to “make some merch buyable with Doge & see how it goes.”
A few moments later, the price of Dogecoin was higher by over 40%. In other words, about $10 billion were added to the market cap of the Shiba Inu-themed token. Later, however, Dogecoin gave up about half of its gains as price slipped from 22 cents to 18 cents.
Economic Data Coming Up Today (EST times)
The Fed’s final press conference of 2021 happens today at 02:30 pm. It would be the most-watched event of the week. Prior to it, the Federal Reserve will release its interest rate decision accompanied by a statement at 02:00 pm.
Also, inflation data arrives from Canada at 08:30 am. Later, at 04:45 pm, New Zealand will announce its GDP report for the third quarter. Next, Australia will publish its employment change for November at 07:30 pm.