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USD: Tight range likely to be maintained ahead of FOMC - MUFG

FXStreet (Delhi) – Derek Halpenny, Research Analyst at MUFG, notes that the key speech from Fed Chair Yellen yesterday has helped lift the US dollar after Yellen offered a clear unambiguous signal that the federal funds rate will be increased later this year.

Key Quotes

“With two meetings remaining we maintain that the FOMC will act in December. Chair Yellen explicitly stated that “my colleagues and I” expect a rate increase later this year, offering two reasons for this.”

“Firstly, the real level of the federal funds rate was below what would be consistent with real GDP growth expanding in line with potential and secondly, the “headwinds” abroad would continue to fade, thereby boosting the economy’s underlying strength.”

“The fact that Chair Yellen is not one of the two ‘Dots’ that shifted from expecting the first rate increase to take place this year to next year is a clear indication that the key members of the FOMC do not want to delay much longer.”

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