FOREX Markets USD – Outlook

The two-day summit of the Federal Reserve is set to start today. It is widely expected that an announcement regarding the future U.S. monetary policy will be made and that a schedule for the expected reductions in the Fed’s quantitative easing measures will be agreed. According to forecasts, the Federal Open Market Committee might agree on a slight lowering of the monthly bond purchasing to 75 billion USD from 85 billion USD. Besides this, the Labor Department will release the latest consumer prices which might have increased by 1.8 percent in August. Furthermore, speculations about the running candidates for the post of the next chairman of the Fed are heating up and the current vice chairman Yellen was named as the new front runner, after former Treasury Secretary Summers resigned. The EUR/USD dropped to 1.3333, only a small change from yesterday’s close, while the USD climbed 0.1 per cent against the Yen, trading at 99.20 JPY.

The Dollar Index published by Bloomberg remained nearly unchanged from the day before as it declined to 1,017.30, the weakest level since the 12th of August. Please note, that this is not the commonly used US Dollar Index of 8 leading currencies as used by a majority of professional traders and trading under DX on the futures exchanges: Bloomberg’s Index is rather measuring the performance of the U.S. currency against some basket of 10 major currency peers. The USD was the weakest performer among the tracked counterparts last week and depreciated 0.6 percent, while the JPY added 0.8 percent.

Meanwhile, the EUR benefited from estimates that today’s ZEW surveys might confirm a rise in investor confidence to 45 this month, improving on 42 last month. It means investor confidence would be at its highest level over the last 6 months which, in light of the Euro area’s unsolved crisis, is surprising in itself and only demonstrates that these are measures of market psyche, not economics. The EUR strengthened against the JPY and appreciated 0.1 percent to 132.25 JPY. The GBP kept its level after having lost 0.2 percent yesterday and was at 0.8388 versus the EUR.