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| Dollar gains ground as Fed meeting looms large |
In the early stages of European trade on Monday, the U.S. dollar exhibited strength, maintaining the previous week's gains. This week promises a series of pivotal central bank meetings, with the Federal Reserve taking the spotlight, along with significant economic data releases.
At 03:20 ET (08:40 GMT), the Dollar Index, which gauges the dollar against a basket of six other currencies, recorded a 0.1% increase at 106.445, reflecting a 1% surge over the past week.
Federal Reserve Meeting on the Horizon
The U.S. dollar has enjoyed recent gains, attributed to signs of robust economic performance, even after the Federal Reserve's prolonged interest rate hike campaign. September witnessed a surge in U.S. consumer spending, while the U.S. economy achieved its most rapid growth in nearly two years during the third quarter.
This week, the Federal Reserve convenes, and market expectations suggest that the central bank will maintain the current interest rates, with the decision slated for announcement on Wednesday. Nonetheless, traders harbor concerns that these robust figures may trigger a prolonged period of higher interest rates as they grapple with concerns over overheated inflation.
Yen Sees Respite Ahead of BOJ Meeting
USD/JPY experienced a 0.1% decline, settling at 149.50. The yen received a minor reprieve after last week's climb to a one-year high of 150.78. The primary focus now shifts to the culmination of the BOJ meeting on Tuesday, where the central bank may potentially unveil further adjustments to its yield curve control policy due to high inflation and a significantly weakened yen.
Recent data reveals a notable resurgence in Japanese consumer inflation, potentially pressuring the BOJ to signal plans to scale back its ultra-loose policy.
Euro Weakens Following German and Spanish Inflation Data
EUR/USD displayed a 0.1% decline, reaching 1.0554. The euro retreated in the wake of inflation data revealing a drop in the eurozone. This decline comes shortly after the European Central Bank concluded its longest streak of interest rate hikes in 25 years, holding its main policy rate at 4%.
Data released on Monday indicated that consumer prices in Germany's most populous state, North Rhine Westphalia, rose by 3.1% in October on an annual basis, a decrease from the previous month's 4.2%. Additionally, Spanish Consumer Price Index (CPI) registered a 0.3% monthly rise in October, below the expected 0.6%, and climbed 3.5% on an annual basis, falling short of the anticipated 3.8%.
BOE Expected to Maintain the Status Quo
GBP/USD experienced a 0.2% decline, landing at 1.2094, with the Bank of England scheduled for a policy meeting later in the week. Despite growing concerns of a recession and the UK's inflation rate reaching 6.7% in September (the highest among major economies), the central bank is widely anticipated to keep interest rates unchanged.
In other markets, AUD/USD witnessed a 0.3% rise, reaching 0.6352, while NZD/USD posted a 0.1% increase to 0.5820. USD/CNY edged higher to 7.3185, with market participants awaiting crucial Chinese Purchasing Managers Index (PMI) data set to be released on Tuesday.
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