US Dollar Strengthens as FOMC Meeting Begins

Market Reviews

The US dollar regains ground and is trading as the strongest one. Swiss franc is the weakest one, followed by Australian dollar. The euro retained some of its profits, reaching a 3.5-month high yesterday after the European Central Bank President, Mario Draghi, called the acceleration of core inflation in the Eurozone "relatively strong" and expressed confidence that wage growth will continue.

The global stocks were mixed. DOW ended down 0.68%. S&P 500 also lost 0.35% but NASDAQ gained 0.08%. In Asia, Japanese Nikkei increased by 0.16%. Singapore Strait Times gained 0.39%, but China Shanghai SSE dropped by 0.76%.

The US Fed begins a two-day meeting today, at which interest rates are expected to rise by 25 bps for eighth time since the end of 2015. Markets are also betting on raising rates before the end of the year, although the forecast for 2019 is less clear.

The minutes of July 30-31 Bank of Japan meeting showed that the board members expected Japan’s economy to grow above potential in fiscal 2018. For 2019 and 2020, growth would likely continue “partly supported by external demand”. Most members agreed that CPI would likely increase gradually towards 2% as “firms’ stance gradually would shift toward further raising wages and prices”. The minutes also noted that the global financial markets had temporarily become unstable through early July, “mainly against the background of uncertainties over trade policy, especially between the United States and China”.

The meeting between Japanese Economy Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer was postponed from Monday to Tuesday due to scheduling issue. Japanese Chief Cabinet Secretary Yoshihide Suga said the talks “will focus on further expanding trade and investment between Japan and the US to bring benefits to both nations”.