- The US dollar remains firm, as it attracts support from positive consumer confidence data in the United States and alleviate the fears of the trade war.
- CAD remains on defense amid low oil prices and more BOC discounts.
- Later, the FOMC’s tone is likely to confirm the dollar near the US dollar.
The US dollar offers moderate progress on Wednesday, and extends the gains after a recovery on Tuesday. The USA’s confidence in the United States and reduce concerns about commercial wars support Greenback, with the Federal Reserve minutes to focus.
Reading consumer confidence in the Conference Council won the expectations on Wednesday with a recovery of 12.3 points to the reading of 98.0, after it deteriorated steadily during the past five months, on the back of the induction uncertainty.
The superiority of American data sends debt concerns to the background
The same survey revealed improving expectations about income, working conditions and employment, while the percentage of consumers was afraid of the economic recession in the next 12 months, compared to the previous month.
These numbers compensate for a significant decrease in the orders of the strong American goods, which decreased by 6.3 % in April, on the back of the low demand on the aircraft. Likewise, feelings of risk pushed government debt fears to the back seat, at least at the present time.
The Canadian dollar, on the other hand, is still in defense, with low oil prices, and weighs expectations that increase OPEC+ supply number from July. Moreover, last week’s data reinforced the issue to further alleviate BOC in June, adding sales pressure to LONIE.
Today, the focus is on the minutes of the recent Federal Reserve meeting, which is expected to shed light on the bank’s upcoming monetary policy decisions. The minute’s tone is likely to determine the US dollar reaction until the launch of inflation on Friday.
Fed questions and answers
The monetary policy in the United States is formed by the Federal Reserve (Fed). The Federal Reserve has two states: to achieve price stability and enhance full employment. Its primary performance to achieve these goals is to adjust interest rates. When prices rise very quickly and inflation is 2 % higher than the Federal Reserve goal, it raises interest rates, which increases borrowing costs throughout the economy. This leads to the most powerful USD (USD) because it makes the United States a more attractive place for international investors to stop their money. When inflation decreases to less than 2 % or the unemployment rate is very high, the Federal Reserve may reduce interest rates to encourage borrowing, which weighs on the green back.
The Federal Reserve (Fed) holds eight political meetings annually, as the FOOC Open Market Committee (FOMC) evaluates economic conditions and takes monetary policy decisions. FOMC attends twelve officials of the Federal Reserve-the seven members of the Governor, the President of the Federal Reserve in New York, and four regional regional presidents, the remaining regional regional, who serve for one year on a roundabout.
In extreme situations, the Federal Reserve may resort to a policy called quantitative mitigation (QE). QE is the process that the Federal Reserve increases significantly from the flow of credit in a suspended financial system. It is a non -standard policy scale used during crises or when inflation is very low. The Federal Reserve’s favorite federal weapon was during the great financial crisis in 2008. It includes the printing of the Federal Reserve more than dollars and their use to buy high -quality bonds from financial institutions. QE usually weakens the US dollar.
The quantitative tightening (QT) is the reverse process of QE, as the Federal Reserve stops buying bonds from financial institutions and the manager does not re -invest from mature bonds, to buy new bonds. It is usually positive for the value of the US dollar.
