Home Business News Caution grips the forex market, eyes on the ECB

The US dollar could return to the upside after some corrections yesterday. The dollar index could extend its uptrend while it has recorded strong gains since hitting this year’s bottom in July although it could see some resistance around previous peaks.

At the same time, traders could remain cautious ahead of the US CPI data releases tomorrow which could impact expectations around monetary policy and could create some volatility. Inflation data is the first set of a series of releases that could impact the market leading up to the Federal Reserve meeting next week.

Estimates currently lean toward a pause in interest rates for next week’s Fed meeting. However, some doubts remain regarding the Federal Reserve’s actions during the remainder of the year as another rate hike could still be on the table.

However, attention will turn to Europe first where the ECB is expected to decide on interest rates this week. The European Central Bank is expected to leave rates unchanged but some risks remain for a new hike.

The euro area is facing deteriorating economic fundamentals while inflation remains elevated which could continue to weigh on the euro.

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