Dollar steady ahead of Fed decision; focus on UK budget
SPY•The dollar held near a two-week high ahead of the Federal Reserve’s decision, while sterling slipped before the UK budget. Markets priced a 77% chance of a Fed rate increase of at least 25 basis points in December, and the New Zealand dollar fell as much as 1.4% after its central bank held rates at 2.75%.
1. Dollar and Fed outlook
The US dollar held onto gains on Wednesday, with its index at a two-week high of 102.39, ahead of the Federal Reserve’s interest rate decision. Traders broadly expected no change in policy, while CME Group’s FedWatch tool showed a 77% chance of a rate increase of at least 25 basis points in December. The US 10-year Treasury yield rose 1.2 basis points to 5.01%.
2. UK budget in focus
Sterling fell 0.2% to $1.328 as investors awaited the government’s budget plans. Analysts expected taxes on banks, gambling firms and online marketplaces; significant reliance on borrowing could prompt a selloff in the currency and gilts, the article said.
3. Central bank moves
The Bank of Canada was expected to raise its benchmark rate by at least 25 basis points, while the European Central Bank and Bank of Japan were expected to leave rates unchanged. The New Zealand dollar fell as much as 1.4% to $0.5598 after the Reserve Bank of New Zealand held its rate at 2.75%, surprising most economists surveyed.
