- The US dollar remains firm, receiving support from the positive consumer confidence data of the US and the relaxation of fears on the commercial war.
- The CAD remains defensive in the middle of lower oil prices and hopes of more cuts in the Boc.
- Later today, the tone of the FAR Minutas will probably confirm the short -term management of the US dollar.
The US dollar shows a moderate advance on Wednesday, extending the profits after the rebound on Tuesday. The optimistic US consumer confidence data and the decrease in fears on commercial wars are supporting the dollar, with the publication of the Fed minutes in the focus.
The consumer confidence of the Conference Board exceeded expectations on Wednesday with a rebound of 12.3 points to 98.0, after having constantly deteriorated during the last five months, due to uncertainty about tariffs.
US optimistic data send debt fears to the background
The same survey revealed expectations in improvement on income, business conditions and employment, while the percentage of consumers who fear an economic recession in the next 12 months decreased, compared to the previous month.
These figures compensate for a significant fall in the orders for lasting goods in the US, which fell by 6.3% in April, due to the lower demand of aircraft. Likewise, the appetite for the risk pushed the fears of government debt to the background, at least for now.
The Canadian dollar, on the other hand, remains defensive, with oil prices down, pressured by the expectations that Opec+ countries will increase the offer from July. In addition, last week’s data strengthened the case for more flexibility of the BOC in June, adding sales pressure on the CAD.
Today, the approach is in the minutes of the last meeting of the Fed, which is expected to shed more light on the next monetary policy decisions of the bank. The tone of the minutes will probably determine the reaction of the US dollar until the publication of the PCE inflation on Friday.
Fed Faqs
The monetary policy of the United States is directed by the Federal Reserve (FED). The Fed has two mandates: to achieve prices stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the objective of 2% set by the Federal Reserve, it rises interest rates, increasing the costs of loans throughout the economy. This translates into a strengthening of the US dollar (USD), since it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to foster indebtedness, which weighs on the green ticket.
The Federal Reserve (FED) celebrates eight meetings per year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve officials of the Federal Reserve: the seven members of the Council of Governors, the president of the Bank of the Federal Reserve of New York and four of the eleven presidents of the regional banks of the Reserve, who exercise their positions for a year in a rotary form.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was the weapon chosen by the Fed during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy high quality bonds of financial institutions. The one usually weakens the US dollar.
The quantitative hardening (QT) is the inverse process to the QE, for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the bonds that it has in portfolio that they expire, to buy new bonds. It is usually positive for the value of the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
