US Dollar Index Recovers Ahead of Fed’s Interest Rate Decision

The Greenback managed to recoup part of the ground lost in recent days on the back of firmer results from US data releases, which helped quash concerns over a significant slowdown of the US economy before the Fed’s interest rate decision on Wednesday.

Key Events for Wednesday, September 18:

  • The US Dollar Index (DXY) reversed three consecutive daily pullbacks, supported by a bounce in US yields and expectations of a 50-bps rate cut by the Fed.
  • The FOMC meeting on September 18 will be the focal point of the week, along with other key data releases such as weekly Mortgage Applications by MBA, Building Permits, Housing Starts, and Net TIC Flows.

Market Movements:

Renewed buying pressure in the Greenback subdued EUR/USD’s price action, while GBP/USD traded defensively in response to a data-led bounce in the US Dollar. USD/JPY rose to three-day highs, and AUD/USD alternated gains with losses despite the better tone in the US Dollar.

Upcoming Economic Data:

  • Final Inflation Rate and Construction Output in the euro zone, along with speeches by the ECB’s Buch and McCaul, are due on September 18.
  • The UK Inflation Rate will be published on September 18, along with the Balance of Trade results and Machinery Orders in Japan.
  • The Westpac Leading Index is expected on September 18, followed by a speech by the RBA’s Jones.

Commodity Prices:

WTI prices came under pressure near the $70.00 mark per barrel due to Chinese demand concerns, while gold prices saw a slight pullback on the firmer US Dollar and recovery in US yields. Silver prices traded in a narrow range below the $31.00 mark per ounce.

Analysis:

The market movements and upcoming economic data on September 18 show a mix of factors influencing currency pairs and commodity prices. The focus remains on the FOMC meeting and key economic indicators, which could provide insights into the future direction of the markets. Investors should monitor these developments closely to make informed decisions regarding their investments and financial strategies.

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