Feds Aim For A Lower Interest Rate Hike, Dollar Price Moves Downwards

Feds Aim For A Lower Interest Rate Hike, Dollar Price Moves Downwards

January 23, 2023 0 By Wiley McDermott

The start of the new week has not been an inspiring tale for the US dollar. The traders were not happy to see that the dollar price welcomed them with a downtrend.

The value of the dollar was facing a major crash just as the trading session opened up on Monday. The dollar price had reportedly dipped to a nine-month low on the Monday trading session.

The Feds May Lower Interest Rate Hikes

The reason behind the great plunge in the trading price of the dollar is the recent hints given by the US Feds.

The Feds are not saying much about the interest rate hikes, which they usually do at this time of the month. They have made it a common practice to talk about the interest rates as a month comes to an end.

This time, the situation is different and is giving all sorts of hints and ideas to the traders. Among all the bets, most of the market participants have placed high bets that the Feds may lower the interest rate hikes.

This could be bad news for the traders who have been supporting the dollar for a while. As the Asian markets plummeted a few days back, it was the dollar that became the safe haven for such traders.

If the Feds decide to trim the interest rate hikes, then the situation may get out of hand. The dollar price may plunge tremendously and the developments have started to take place already.

The Feds may sit down in the February meeting and decide that they are going to decrease the interest rate hikes. This is going to be a major downtrend for the US dollar as investors will move away from the greenback.

There is Too Much Silence

For now, the Feds are quiet and they are not saying much about the interest rates. However, the meeting between the Feds is expected to take place on February 1.

The entire world will know what the Feds have decided when the meeting minutes come out. That will give the right picture to the investors and they will stop holding back.

If the interest rate hikes are slashed, then the investors will withdraw from supporting the USD. That would pull the trading price of the dollar tremendously compared to the rest of the major currencies.

If the Feds decide to keep the interest rate hikes as they are right now, then the dollar may remain stable and firm as well.

If the decision is to increase the interest rates, then the trading price of the dollar may get pushed to higher levels.

However, the greater possibility is that the Feds may choose to go for slashing the interest rate hikes in the upcoming months.

Interest Rate Expectations

In the last meeting, the Feds had decided to keep the interest rate hikes to 50 bps. However, the traders are expecting that the Feds may slash the interest rate hikes and move them down to 25 bps.

The implementation of the new rule would be applied in the upcoming month.

Last week, very weak economic data was shared by the Feds that showed a decline in industrial production as well as retail sales.

It reportedly gave the impression that by the end of the year, the economy of the United States had slowed down. It happened despite the labor market data coming up to be very promising and with strong figures.

US Dollar Index’s 0.3% Decline

The DXY has recorded a 0.3% decline in the latest trading session and it is currently at 101.515 against six major currencies.

The euro has reportedly grown 0.5% stronger against the dollar, after getting pushed up to $1.0913. On the other hand, the Japanese yen is constantly growing stronger against the dollar.