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US GDP and FOMC meeting could dampen the USD rebound - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the US dollar faces some downside risks in the week ahead from the upcoming FOMC meeting and release of the latest US GDP report for Q3.

Key Quotes

“The US dollar rebounded sharply last week lifting the dollar index to its highest level since mid-August. A further loosening of monetary policy by overseas central banks has helped to reaccelerate the stronger US dollar trend.”

“The sharp uptrend for the US dollar which started from the middle of last year followed the ECB’s decision to lower its deposit rate into negative territory for the first time in June 2014. It could be a case of history repeating itself to a degree if the ECB decides to lower its deposit rate further into negative territory in December which could again trigger another leg higher for the US dollar.”

“The Fed is not expected to begin raising rates this week but the accompanying statement will be scrutinized closely to see if the Fed still leaves the door open to raising rates this year in December. At this stage we would expect the Fed to leave the door open to raising rates this year.”

“Financial conditions in the US have eased significantly since their last meeting making it easier to begin raising rates now. However, the US economy has lost some upward momentum recently as will be evident in Q3 GDP report. Large drags from net trade and inventories will exaggerate the underlying slowdown in growth although personal consumption growth will remain robust.”

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