US dollar strengthens ahead of Fed interest rate decision
Tuesday 26 July, 2022
Daily Currency UpdateThe US dollar strengthened against a basket of major currencies on Tuesday as market participants geared up for the US Federal Reserve's interest rate decision on Wednesday. Many expect the central bank to hike 75 basis points like in June in order to bring down inflation sitting at multi-decade highs. While this move is mostly priced into the US dollar, the market will be interested in policymakers' messaging over the health of the US economy. The June Chicago Fed National Activity Index contracted by more than anticipated to -0.19 and the July Dallas Fed Manufacturing Business Index fell from -17.7 to -22.6, indicating slowing economic activity. If the economy slows down significantly enough to bring down consumer demand, this could cool down inflation which could mean the Fed would alter the pace of monetary tightening this year. The US Dollar Index was trading at 107.06 at the time of writing.
Key MoversThe euro struggled against a broadly strong US dollar on Tuesday as more concerns over a global recession took hold, bringing up demand for the safe-haven USD. The International Monetary Fund cut its global growth forecasts again on Tuesday, saying that world GDP contracted in the second quarter due to downturns in China and increases in food and energy prices from Russia's war on Ukraine. EU countries agreed to cut gas use by 15% in the next six months in the face of more reductions in supply from Russia. EURUSD was down 0.89% trading around 1.0135 at the time of writing.
- EUR/USD: 1.0118 - 1.0246 ▼
- GBP/USD: 1.1964 - 1.2090 ▼
- AUD/USD: 0.6927 - 0.6981 ▼
- USD/CAD: 1.2821 - 1.2887 ▲