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The Federal Reserve has hiked rates since January 2022. However, this could be the first instance when there will not be any increase in the rate. Instead, experts speculate that the rate could either be kept stagnant or brought down. All the key decisions are due this week, starting with the US May Inflation data.
Helen Given, a forex trader, has said that even though it appears that the Fed is likely to skip the hike this meeting, no one wants to be on the bad side by choosing to hike the rate again. This could be a hint that even if a rate hike is a solution, it may not happen to please the markets. Nevertheless, this is a far-fetched assumption which is less likely to be true in any scenario.
Rate hikes have happened to control inflation and could happen again if the situation demands an unpopular opinion.
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Given has added that the hike would be positive for the dollar since it goes against the market’s expectations. The US Dollar registered a loss of 25 basis points, making it the worst drop since the middle of April this year. There is a rise in the Euro to the value of $1.0760 at a time when the Japanese Yen has slipped to 139.55, that is by 0.2%, for a single US Dollar.
A similar sentiment of not raising the rates has been expressed by the Reserve Bank of New Zealand. Authorities signaled last month that they were done tightening the rates, raising them to the highest in 14 years. That was a point to 5.5%. The currency fell by 2.7% in May, leaving forex brokers in the US puzzled about short-term prospects. NZ’s currency was last seen trading at $0.6124. The AUD marked itself at $0.6750. It came at a time when the region was thin on trading due to holidays.
China’s Yuan registered a loss against the US Dollar, achieving the lowest level since November. This is based on the soft data, which has raised expectations that the People’s Bank of China may ease the situation.
December started positively for the US stocks after they achieved their best-ever month. Inflation was 3.2% at the beginning of the month. The Feds are aiming to keep it steady at 2%. A rise in the stocks is majorly a return for those who had bet on interest-rate cuts. The current level is considered cool by the Federal Reserve, which probably has no intention of any more hikes.
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As for the US Dollar, forex experts have asked traders not to hold their breaths. At least till the time the Feds take a call on future aspects of rate hikes or cuts. The current week will unfold how the market ends this year and begins the next year.
