Title: Dollar Edges Higher; Fed Meeting the Highlight of Busy Week

Dec 13, 2021 03:01AM ET

By: AnalysisWatch

The dollar edged higher in early European trade on Monday at the start of a week that includes a series of central bank meetings, including that of the Federal Reserve, while concerns about the Omicron COVID variant persisted.

At 2:55 AM ET (0755 GMT), the dollar list, which tracks the greenback against a bushel of six different monetary forms, was up 0.2% at 96.243.

USD/JPY rose 0.1% to 113.52, EUR/USD fell 0.2% to 1.1286 and the risky AUD/USD fell 0.2% to 0.7154.

GBP/USD fell 0.3% to 1.3230 after British Prime Minister Boris Johnson warned on Sunday that Britain faced a "tidal wave" of the Omicron variant of the COVID-19 virus as he accelerated the country's booster program to contain the damage.

The Bank of England is one of the main central banks holding meetings to set monetary policy this week, and the new virus concerns are expected to prompt the central bank to exercise caution and delay its first interest rate hike since the pandemic until 2022.

The European Central Bank and the Bank of Japan have also scheduled meetings, but the Federal Reserve's two-day meeting, which concludes on Wednesday, is drawing the most attention.

The Fed is widely expected to announce a faster pace of tapering of securities purchases this week and thus an earlier start to rate hikes, especially after Chairman Jerome Powell's recent aggressive speech to Congress and given that US consumer prices on Friday posted their biggest annual increase since 1982.

The market is already pricing in a 25 basis point US rate hike by May, and a move by the Fed to accelerate the end of its bond-buying program is likely to support the dollar, especially against currencies whose central banks are likely to tighten more slowly.