The most important event on the economic calendar for this week is the release of the FOMC (Federal Open Market Committee) meeting minutes. These will show us the internal discussions between the Fed members at the last FOMC meeting.
In a period of high uncertainties, starting with the ambiguity showed by the Bank of England last week, and continuing with negotiations over Greece’s debt, one thing remains on the table: the stronger US dollar.
There is a natural tendency for the US dollar to rise during periods governed by sanctions, such as the war for example. This is because investors are seeking the best value for their money and that is provided by the safe-haven status of the USD, the world’s funding currency.
Latest polls show markets are expecting the Federal Reserve to move on rates in June, however, Janet Yellen, chairwoman of the Federal Reserve hinted that the Fed will act on rates in a couple of meetings. The hint of a “Couple” of meetings may mean a surprise meeting sooner than June. I estimate that this surprise meeting, if it happens, will be held in March.
If this happens, markets will be caught off guard and the US dollar should fly.
I wouldn’t count on such a move from the Fed, but I will look for this week’s minutes to show bullishness on the dollar and a hawkish statement to show the Fed will act on rates sooner rather than later.
That being said, expect the US dollar to rise all over the dashboard starting with Monday’s minutes and the move to continue well into Friday’s closing. This means the EURUSD will be attracted to the 1.1250-1.1300 area. The GBPUSD may dip into 1.51-1.52 again and the USDJPY may flirt with the now all-important 120 level.
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