Dollar Dips as Fed Prepares for Interest Rate Boost

The US dollar dropped in value during trading on Tuesday as the country’s central bank looked set to raise interest rates.

The Federal Reserve meeting, which began yesterday, is expected to conclude with the third interest rate boost this year. Some analysts have even predicted that a fourth rise could come later in the year.

The fact that the decision is largely expected means that the assessments of committee members will perhaps be more important for the dollar’s performance than the actual change.

Any stated worries about inflation, for example, could fuel responses from dollar traders.

As a result of the ongoing meeting, the dollar index, which assesses the currency’s status compared to a basket of other international currencies, dropped by 0.1% to 94.120.

Markets will also be keeping an eye out for any political reaction to the decision too. The Fed, which has historically been seen as independent, has been the target of public criticism from US President Donald Trump in recent months, and this could well persist after this meeting.

However, the Fed’s meeting isn’t the only interest rate decision on the cards for Wednesday.

The Reserve Bank of New Zealand will also make its decision at 9pm GMT. However, the Bank there is expected to keep interest rates at their current level of 1.75%.

The forex markets look set to remain active for the rest of the week as well.

Before the two big interest rate announcements of today, there’ll be some important housing market data releases out of the US. Month on month new home sales information for August will be out at 2pm GMT, and it’s expected that this figure will shift upwards from -1.7% to +0.5%.

Following that, there’ll be data on US crude oil stocks change at 2.30pm GMT.

Into tomorrow, there’ll be a meeting of the Organization of the Petroleum Exporting Countries (OPEC) all day – which 13 oil producing countries are expected to attend.

The Turkish lira, which has found itself facing a number of instability problems recently, will see the country’s economic confidence index for September released at 7am GMT.

It’s possible that this indicator’s performance will be linked to the performance of measures designed to prop up the currency.

Italian business and consumer confidence surveys for September are out at 8am GMT on Thursday, while European M3 money supply and private loans data for August will be out at the same time. The year on year change in private loan amounts is expected to dip from 3% to 2.9%.

Andrew Haldane, the Chief Economist at the Bank of England and a member of the Bank’s monetary policy committee, will speak at 11.45am GMT. Haldane is responsible for statistics at the Bank, so sterling traders with a particular interest in figures will watch his speech closely.

Mark Carney, the Bank’s governor, is also due to make a speech – this time at 2pm GMT.

The day will be rounded off by a series of Japanese data releases from 11.30pm GMT onwards. These will include July’s preliminary industrial production figures, as well as retail trade data and unemployment figures for August.