The USD remained stable against most major currencies in the trading session on June 17 as investors awaited the first monetary policy decision of US Federal Reserve (Fed) Chairman Kevin Warsh.
The Euro remained almost unchanged at 1.1605 USD/euro. Meanwhile, the British pound slightly decreased to 1.3420 USD/pound after UK inflation data was lower than expected.
The focus of the market is currently the Fed policy meeting. Although most investors predict the Fed will keep interest rates unchanged in this meeting, all attention is focused on economic forecasts and policy messages announced after the meeting.
Ms. Jane Foley - Head of Foreign Exchange Strategy at Rabobank said this is the event that the global financial community is following most closely this month.
No one expects the Fed to change interest rates immediately, but the market is looking for signals of policy orientation in the near future," she said.
One of the notable contents is the interest rate forecast graph (dot plot), reflecting the expectations of Fed members about the future interest rate roadmap.
Currently, the monetary market is still assessing the possibility that the Fed may implement another wave of interest rate hikes before the end of the year if inflationary pressure remains high.
Recent developments in energy prices have somewhat eased concerns about inflation, thereby helping to reduce pressure on monetary policy of central banks.
In addition to the Fed, the market also turns its attention to the meeting of the Bank of England (BoE) taking place this week. Experts predict the BoE will keep the current interest rate unchanged.
Newly released data shows that inflation in the UK remained at 2.8% in May, unchanged compared to the previous month and the lowest level in more than a year.
According to Rabobank, if inflationary pressure continues to cool down, BoE may have more room to maintain its current policy without further tightening.
On the foreign exchange market, the Japanese Yen traded around 160.25 yen/USD after the Bank of Japan (BOJ) just raised interest rates to the highest level in more than three decades.
Meanwhile, the Swedish krona weakened after the Swedish Central Bank kept interest rates unchanged. The agency said that inflationary pressure still needs to be monitored, although economic activities are growing slower than usual.
In general, the global financial market is entering a phase of waiting for new policy signals from major central banks, in the context that inflation is still an important factor affecting interest rate prospects in the last months of the year.
