The U.S. dollar strengthened its position on April 28 as investors moved to the sidelines ahead of a U.S. Federal Reserve policy statement and a speech by Joe Biden later on Wednesday. The country’s president is set to announce more stimulus plans. One of the most important currencies in the world recovered from a one-month low hit earlier this week.
Officials are not expected to take any action as the meeting ends on April 28. Nonetheless, they might acknowledge signs of positive momentum in the economy in the statement at the end of the meeting.
Fed Chairman Jerome Powell is seen as likely to reiterate his dovish message. Even a small shift in rhetoric could trigger a noticeable move in markets.
Currency markets were mostly calm, but signs of nervousness were evident in the bond markets. Yields on 10-year U.S. Treasury notes increased above 1.60% after lukewarm auction results.
The dollar index added 0.2% to 91.047, bouncing back from Monday’s low of 90.679. It was the worst result since March 3. However, investors were not persuaded a recent downtrend had ended.
Federal Reserve and economy
The central bank continues to operate on high alert for more than a year. Fed officials took measures to keep markets liquid and credit flowing as the pandemic closed the economy. The country’s economy is recovering, bolstered by fiscal and stimulus policy, and the coronavirus vaccines.
The Federal Reserve has to counter calls for higher rates in the face of extremely strong data and the prospect of more stimulus. Most likely, the central bank will not change its position regarding rates.
Investors’ inflation expectations rose above 2.40% on April 27, the highest since 2013. It is measured by the break-even inflation rate calculated from U.S. inflation-linked bonds.
President Joe Biden wants to boost the country’s economy, and his speech will cover that topic. Analysts expect Biden to announce a plan to raise taxes on the richest Americans, including the largest-ever increase in levies on investment gains.
Dollar and main peers
The euro dropped 0.2% $1.2070, off Monday’s two-month high of $1.2117.
The dollar stood at 108.97 yen, and it added 0.59% on Monday. It continues to recover from a seven week-low of 107.48 touched last week, in tandem with rises in U.S. bond yields.
The Australian dollar declined 0.3% to $0.77415 after the country’s consumer price index came in weaker than expected.
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