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  • Writer's pictureanalysiswatch

Title: Dollar firm as Fed meeting and growth risks hold sway

Jul 25, 2022 01:05AM ET

By: AnalysisWatch

The dollar was steady on Monday as traders braced for a sharp rise in US interest rates this week and sought safety as data pointed to a weakening global economy.

The greenback rose slightly against most major currencies in the Asian session, trading at $1.0208 per euro and recovering Friday's losses to buy 136.26 Japanese yen.

The Federal Reserve of the United States concludes its two-day meeting on Wednesday, with markets pricing in a 75-basis-point rate hike and a 9 percent probability of a 100-basis-point hike.

Market reaction will depend on how hawkish Chairman Powell sounds in his determination to reduce inflation in the face of slowing growth.

Slowing growth has prompted traders to lower their expectations for rate tightening, fearing that the shaky economy can only sustain so many hikes.

However, investors are still reluctant to push the dollar too far from all-time highs given the global outlook.

On Monday, the dollar index stood at 106,650, just below the two-year high reached in mid-July (109,290), and analysts don't see many hurdles ahead for the dollar.

That view was reflected in Friday's data, which showed that U.S. business activity contracted for the first time in nearly two years this month, euro zone activity retreated for the first time in more than a year, and U.K. growth hit a 17-month low.

Geopolitical tensions are also high, as Europe's growth depends on Russian gas, and the Financial Times reports that China has issued stern warnings against a possible trip to Taiwan by US House Speaker Nancy Pelosi.

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