The most important event for the US dollar is the meeting of at the US Federal Reserve's Federal Open Market Committee (FOMC) meeting and to decide monetary policy and set interest rates, on Wednesday.
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The FOMC's projection for inflation and economic growth over the next 2 years will also provide a breakdown of their release. The Fed is not expected to cut interest rates but there is an outside chance it may do because of subdued inflation and a negative outlook for the economy. There is a higher chance it could hint at a possible cut in the near future, either in the statement or via Chairman Powell’s press conference.
We are yet to see clarity on overcoming outstanding issues, like the US-China trade talks and oil controversy which are affecting global economies. This continues to cause volatility in the exchange rates paired with the US dollar and trade partners.
The ongoing turmoil with the Brexit saga has caused cable rates to fall in the last month by nearly 5 cents, down to 1.2588 by the end of Friday. The pound to US dollar interbank rate is seems likely to remain range bound at these new levels until further resolution on Brexit and trade wars. However, a Johnson win is not necessarily bad thing for sterling, instead the key issue going forward will be how the EU reacts to his advances for a renegotiation, and his subsequent response. As they have stated many times that there is no renegotiation.
Be wary of a potential recovery in sterling over coming days as there is a chance that any new Brexit developments and expectations for a 'no deal' Brexit could cause more movement for the pound.
Building Permits and housing data is out tomorrow and is expected to stay close to the previous release but if they do come in different from expected it might show a view on a key area of the US economy.
Manufacturing Purchasing Manager's Index (PMI) is forecast to remain at 50.5 when it is released and services PMI is expected to show a rise to 51.0 from 50.9 in the previous month. PMIs are widely seen as a leading indicator for the economy and growth. A lower-than-expected result would weigh on the dollar and vice-versa for a higher.
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