The Dollar Dips: Dollar edges lower as the U.S Federal Reserve retains “Easy Policy Stance.”
The dollar dipped earlier today as investors moved to riskier currencies after the minutes from the Federal Reserve’s latest meeting reinforced its easy policy stance.
At 07:55 GMT, the Dollar Index, an index that tracks the dollar against a basket of six other currencies, went down 0.1% at 90.903.
EUR/USD rose 0.1% to 1.2047, GBP/USD rose 0.1% to 1.3864, USD/JPY was down 0.1% at 105.81, while the ever risk-sensitive AUD/USD rose 0.1% to 0.7758.
The Federal Reserve released the minutes from the policy meeting it had yesterday. The minute reinforced the reserves plans to let the economy overheat while maintaining an ultra-accommodative monetary policy. The Federal Reserve intends on expanding the money supply to boost the economy, which is seen in the constant push for the Biden $1.9 trillion stimulus bill.
The minute also showed that the central bank (the Federal Reserve) is upbeat on America’s growth prospects in 2021. The Fed are unbothered about all the talks of a higher inflation and it seems unlikely that it will raise the rates nor reduce its bond-buying scheme. Progress is being made on President Joe Biden’s proposed $1.9 trillion stimulus package, with the president meeting labor leaders on yesterday to gain their support. This package is prompting much discussion over the likely path of inflation levels going forward, given it’s expected to be largely funded by debt (i.e borrowing).
All of these points to the facts that the dollar may continually be under pressure. Thus, expect a back and forth movement in the dollar for the rest of the week. So, constantly watch the movement of the market so you know when to go long or short on the dollar and other assets related (inversely or directly) to the dollar.