The dollar held firm yesterday as worsening inflation worries pushed the case for raising interest rates. Over the past week it has strengthened by almost 1% against both the pound and Japanese yen (indeed, strengthening during the past month against the latter to its highest rate for five years). USD fell slightly against the euro, returning to where it began October.
It was a mixed day for data yesterday. ISM Manufacturing PMI came in slightly above expectations but below last month at 60.8, with supply constraints again the issue. It’s a quiet day today so the markets will be looking ahead to tomorrow’s decision from the Federal Reserve, monetary policy committee, the FOMC.
The FOMC will announce its interest rate decision at 7pm UK time tomorrow, against a background of inflation rising at 4.4%. While exchange rates are not expected to rise until next year, stimulus measures are widely anticipated to begin being tapered.
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