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US dollar under pressure ahead of Fed rate decision

business-articlesUS dollar under pressure ahead of Fed rate decision
  • US dollar vulnerable as anticipation for Fed meeting mounts
  • Weaker UK inflation to dent pound demand
  • Canadian dollar to lose further ground as inflation eases

US dollar demand limited ahead of Fed decision

Confidence in the US dollar could pick back up this evening if the Federal Reserve follows through with the interest rate hike markets expect.
However, even if the Fed delivers its much-anticipated rate hike USD exchange rates could still weaken in response to the nature of policymaker commentary.
Signs that the central bank is likely to leave interest rates on hold for longer in 2019 would limit the appeal of the US dollar significantly.
On the other hand, evidence of continued hawkishness may give USD exchange rates a boost.

Pound vulnerable to weaker UK inflation data

The mood towards the pound may sour today if November’s UK consumer price index data eases as forecast.
As investors expect to see the headline inflation rate ease from 2.4% to 2.3% GBP exchange rates look vulnerable to fresh downside pressure in the near term.
A weakening in inflationary pressure would give the Bank of England (BoE) further incentive to leave interest rates on hold for longer, keeping the pound on the back foot.
If price pressures show fresh signs of picking up, on the other hand, GBP exchange rates could strengthen even in the face of Brexit-based uncertainty.

Easing inflation to extend Canadian dollar losses

Focus will also fall on the latest Canadian consumer price index data as CAD exchange rates look for a potential rallying point.
However, the Canadian dollar could see further losses this afternoon as inflation is forecast to experience a contraction on the month.
If the headline CPI falls below the Bank of Canada’s (BOC) 2% target rate this is likely to weigh heavily on CAD exchange rates.
Developments in the oil market may also keep the Canadian dollar under pressure today as global oversupply worries drive prices lower.

Upcoming Data:

Wednesday, 19th December 2018
09:30 GBP Consumer Price Index
10:00 EUR Eurozone Construction Output
13:30 CAD Consumer Price Index
19:00 USD Federal Open Market Committee Rate Decision
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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