The US dollar rose against most of its major rivals (though not all of them) today even as mixed macroeconomic reports did not lend much support to the currency.
One of the major supporting factor for the dollar remains the outlook for monetary tightening from the Federal Reserve. Earlier this week, Fed Chairperson Janet Yellen signaled that the US central bank is going to proceed with removing monetary easing:
Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession. Persistently easy monetary policy might also eventually lead to increased leverage and other developments, with adverse implications for financial stability. For these reasons, and given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent.
As of now, chances of a December interest rate hike are above 70% as shown by CME FedWatch.
Another reason for the dollar’s strength are hopes for tax reforms proposed by US President Donald Trump, which should reduce corporate taxes. With that said, analysts think that his plans are likely to face fierce opposition in Congress.
EUR/USD traded at 1.1801 as of 16:58 GMT today after opening at 1.1785. GBP/USD dropped from 1.3439 to 1.3392. USD/JPY advanced from 112.33 to 112.62.
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