Market analysis on behalf of Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A
The US dollar remained steady near multi-week highs ahead of the Federal Reserve’s monetary policy decision. Markets assign a nearly 93% probability to a 25-basis-point rate increase, up from 61% a week ago. Treasuries also stabilized ahead of the announcement.
Attention will therefore focus on the voting split and, in particular, Chair Kevin Warsh’s stance. A hawkish message signalling further increases could push yields higher and support the dollar, while any attempt to downplay the prospect of additional tightening could add volatility to bond and currency markets.
Geopolitical tensions are providing an additional source of support. Elevated crude prices continue to fuel inflation concerns and reinforce expectations of tighter monetary policy, while heightened uncertainty is also boosting safe-haven demand for the dollar.
The Bank of England’s decision tomorrow and the Bank of Japan’s decision on Friday could generate further volatility. A hike in interest rates in Tokyo is widely anticipated and could strengthen the yen.
Zaid Barem / ymm
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