The forex market could see increasing volatility with US inflation data expected tomorrow and the US debt ceiling debate continuing to fuel anxiety among traders.
Concerns linger around the capacity of the US administration to iron out a deal in due time as well as the uncertainty around the exact date the US could be exposed to a default on its financial obligations.
Daniel Takieddine, CEO MENA at BDSwiss said, “The US dollar rose to a certain extent against the euro and the pound as traders moved to secure their gains after both currencies extended significant increases. Gains for the US currency could be limited with monetary policies’ directions not playing in its favor over the long term.
“Both the European Central Bank and the Bank of England are expected to continue raising rates during the next few months while the Federal Reserve could pause and potentially reduce rates.
“In Asia, the Chinese yuan remained mostly unchanged against its US counterpart despite some economic data pointing to shrinking imports and slowing exports’ growth.
“Traders could continue to monitor the Chinese economic recovery in the meantime. Traders could continue to favor the dollar thanks to higher interest rates in the US for a while until the Federal Reserve moves to pivot its monetary policy potentially later this year.
“The Japanese yen could continue to lose ground against the US dollar while Japan maintains a soft monetary policy. The currency pair could however see some volatility during the next few days as new Japanese economic data is published.
“On a different note, the lead-up to Turkish elections and the uncertainty around its outcome could fuel some volatility for the currency against the dollar. The Turkish lira has been losing value for a year as the country grapples with economic and inflation issues.”
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