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Dollar Forex Market Slightly Weaker Ahead of Fed Policy

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  • USD Dips Slightly as Positivity Returns
  • Attention Also on Retail Sales Data
  • Stocks Attempt to Continue Rally 

The US Dollar forex market has dipped slightly through Tuesday and moving into Wednesday. While the Dollar Index still remains very strong amid the ongoing geopolitical situation, there was a glimmer of hope for other major currencies in the last day. This comes as the Fed looks set to raise rates but has adopted a softer tone in doing so. At the same time, eyes will be on US retail sales data to come later and the Wall Street fightback which looks to extend into another day.

Dollar Drop Opens Door to Others

The US Dollar has been trading extremely strongly for weeks if not longer. This has particularly been the case since the Russian invasion of Ukraine and continually spiking inflation figures. Late Tuesday and early Wednesday forex trading has seen a lull in the currency as investors look ahead to the Federal Reserve policy announcement where a rise in interest rates is expected to be the key news. 

This rate rise was led in with a more hawkish tone, though the policymakers seem to have softened their stance likely due to the current turmoil in Eastern Europe. This could lead to a less pronounced increase in rates than had been expected. The market appears to be buoyed by this prospect which has allowed the EUR/USD to regain its position above 1.10 at least for now.

US Data Release Also Pivotal

Also on the docket for the day are February Retail Sales. These are expected to ease off significantly from the previous month. Such a result would work in favor of the more confident, risk-on sentiment that has been seen by forex brokers through the middle of this week. 

At the same time, the market will remain focused on developments between Russia and Ukraine as negotiations continue and have been reflected in a more positive light by both sides despite no resolution being reached as yet. As well as the expected 25 basis point rise in the interest rate, great attention will be focused on any economic comments from Fed Chair Powell.

Wall Street Boosted Again

Stocks on the street have been battered of late. A combination of factors including inflation and rate-hike worry combined with the Russian push into Eastern Europe to remove any confidence from the stock market. There have been wildly turbulent days and weeks since. One day’s gains turned into the next day’s losses. There is now a feeling though that a corner may have been turned. 

After pricing in a stronger hike, traders were positive on a more dovish Fed approach. Oil prices dropped below $100 also to help the Dow Jones notch a 600 point gain on Tuesday which was reflected across the major indices as well. There are further positive signs in early hours trading with futures broadly turning positive.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.