Forex News
- Gold price faces selling pressure as oil prices rise sharply amid fears of the US blockade extension on Iran.
- Investors expect the Fed to leave interest rates unchanged.
- The Fed is expected to hold interest rates at their current levels the entire year.
Gold price (XAU/USD) trades 0.5% lower to near $4,570 during the European trading session on Wednesday. The yellow metal tumbles as oil prices extend the rally, following comments from United States (US) officials that President Donald Trump has instructed aides to prepare for an extended blockade of Iran, The Wall Street Journal (WSJ) reported.
The extension of the US blockade on Iranian sea ports also suggests that the Strait of Hormuz, a vital passage to almost 20% of global energy supply, will remain closed further.
Theoretically, higher oil prices de-anchor inflation expectations globally, a scenario that encourages central banks to raise interest rates or hold them “higher for longer”, which diminishes the appeal of non-yielding assets, such as Gold.
Meanwhile, investors await the Federal Reserve’s (Fed) monetary policy, which will be announced at 18:00 GMT. The Fed is certain to leave interest rates unchanged in the range of 3.50%-3.75% for the third meeting in a row, according to the CME FedWatch tool. The US central bank is expected to warn about upside inflation and downside economic risks in the wake of elevated energy prices.
Investors will look for cues regarding the Fed’s monetary policy outlook in the monetary policy statement and Fed Chair Jerome Powell’s press conference. The CME FedWatch tool shows that the Fed will keep interest rates at their current levels by the year-end.
Gold technical analysis
In the four-hour chart, XAU/USD holds below the 20-period exponential moving average (EMA) at $4,639.62, keeping the near-term bias bearish as recent rebounds have failed to reclaim this dynamic supply zone.
The Relative Strength Index (RSI) hovers near 32, suggesting persistent downside pressure, although the approach toward oversold territory hints that selling momentum could start to moderate if price stabilizes.
On the topside, initial resistance is aligned with the 20-period EMA around $4,640, and a sustained break above this barrier would be needed to ease the current bearish tone and open the door toward higher consolidation levels. Looking down, XAU/USD is vulnerable near $4,560; and a break below the same would expose it to $4,500.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- USD/CAD stalls below 1.3700 after bouncing from weekly lows below 1.3600.
- The BoC is expected to leave rates at 2.25%, forecasting a short-lasting inflationary spike.
- The Fed is also anticipated to keep rates on hold with the future of Chairman Powell in question.
The US Dollar (USD) is trading practically flat against the Canadian Dollar (CAD) on Wednesday. The pair has stalled below 1.3700, after bouncing from lows sub-1.3600 earlier this week, as investors bid their time ahead of the outcomes of the Bank of Canada (BoC) and the US Federal Reserve (Fed) monetary policy meetings due later in the day.
The BoC is widely expected to leave its benchmark rate unchanged at the current 2.25%, despite higher inflationary pressures stemming from the war in the Middle East. BoC Governor Tiff Macklem affirmed earlier this month that he expects inflationary pressures to spike in the near-term, to return towards the bank’s 2% rate by the end of the year.
A few hours later, the Fed will release the decision of its last meeting with Jerome Powell at the front. The bank is also expected to leave interest rates on hold this time, and probably also during the whole 2026. The monetary policy committee, however, remains deeply divided, and the presumed next Fed Chair, Kevin Warsh, will have to cope with pressures from US President Trump to ease monetary policy.
Apart from that, Powell will have to decide whether to continue as Governor, as his term at the board extends until 2028, or leave the bank, as Trump demands. Fed chairs normally leave the bank once their four-year term expires. In this case, however, it might be different as Powell has suggested that he would remain at the bank if he sees its independence under threat.
Economic Indicator
BoC Interest Rate Decision
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Last release: Wed Mar 18, 2026 13:45
Frequency: Irregular
Actual: 2.25%
Consensus: 2.25%
Previous: 2.25%
Source: Bank of Canada
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Last release: Wed Mar 18, 2026 18:00
Frequency: Irregular
Actual: 3.75%
Consensus: 3.75%
Previous: 3.75%
Source: Federal Reserve
OCBC strategists Sim Moh Siong and Christopher Wong report Gold has traded lower despite geopolitical tensions, as higher Oil prices refocus markets on inflation, real rates and the Federal Reserve (Fed) path. Hawkish repricing has pushed implied 2026 Fed cuts down to 5bp, with a rising wedge pattern and fading momentum leaving near-term risks skewed to the downside, below supports at 4452 and 4260.
Technical setup points to downside risks
"Gold traded lower this week despite elevated geopolitical uncertainty."
"Higher energy prices risk keeping inflation expectations sticky and could potentially delay Fed easing cycle."
"For gold to regain stronger traction, markets may need to see either a pullback in oil prices or signs that geopolitical tensions are easing enough to revive dovish Fed pricing."
"On price formation, a rising wedge pattern appears to be in the making."
"This is typically associated with a bearish reversal in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Societe Generale analysts discuss persistent headwinds for the Indian Rupee (INR) against US Dollar (USD) as India faces large Oil and Gold import bills. Economist Kunal Kundu warns of rising risks that the Reserve Bank of India (RBI) may tighten policy pre-emptively due to energy prices, urea’s gas linkage and adverse weather. They sees limited justification to oppose current INR weakness and anticipates potential RBI bond operations.
Rupee pressured by imports and RBI risks
"In Asia, the headwinds confronting the INR show no sign of lessening. The currency returned yesterday below 94.50 after opening gap down as the country grapples with hefty oil and gold import bills."
"Our economist Kunal Kundu highlights growing risks of pre-emptive monetary tightening by the RBI, driven by a triple hit of (a) elevated energy prices, (b) urea’s tight linkage to natural gas, and (c) adverse weather from heat waves or a delayed monsoon."
"Against this backdrop, we see little merit in trying to fade the trend and a retest of the recent high near 95.23 could be inevitable."
"Additionally, the RBI may become more active by selling front-end and buying 10y maturity IGBs to keep the 10y yield below 7.0%."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The US Federal Reserve is expected to leave the policy rate unchanged for the third consecutive meeting in April.
- The economic uncertainty created by the Middle East crisis clouds the Fed’s policy outlook.
- Fed Chair Powell’s comments could ramp up USD volatility as markets see a strong chance of the bank maintaining the status quo by end-2026.
The United States (US) Federal Reserve (Fed) announces its interest rate decision on Wednesday, another pivotal meeting for markets to gauge the stance of policymakers as energy prices remain uncomfortably high amid ongoing uncertainty in the Middle East, putting the Fed’s dual mandate under strain.
Markets widely expect the Federal Open Market Committee (FOMC) to keep interest rates unchanged in the range of 3.5%-3.75% for the third consecutive meeting in April.
As this decision is fully priced in, Fed Chair Jerome Powell’s comments in his last post-meeting press conference, given his term ends in over two weeks, could offer key clues on the policy outlook and drive the US Dollar’s (USD) performance.
Republican Senator Thom Tillis, who took a stance to block any Fed Chair nominee while the probe into Jerome Powell remained open, announced that he is prepared to move on with the confirmation of Kevin Warsh after the Department of Justice dropped the investigation on Friday. Warsh is now widely expected to become the US central bank’s new chair from May 15, when Powell’s current term ends.
The CME FedWatch Tool shows that investors see little to no chance of a rate cut at least until September, while pricing in about an 80% probability that interest rates will remain where they currently are by end-2026. Earlier in the year, there were strong expectations of multiple interest rate reductions, but surging Oil prices and the potential impact on global inflation caused investors to reassess their outlooks.
The revised Summary of Economic Projections (SEP) published in March showed that policymakers’ median projection pointed to a 25 basis points (bps) cut this year, unchanged from the SEP published in December 2025. However, the minutes of the March meeting highlighted that many participants saw risk of inflation remaining elevated for longer than expected amid persistent Oil price increase, which could even call for rate hikes.
TD Securities analysts note they expect the Fed policy rate to remain unchanged in April. “The labor market remains balanced, while headline inflation has ticked up owing to the oil shock. With uncertainty still high, the Committee will likely reiterate patience. Powell is likely to stay neutral on policy and avoid new comments on succession, despite this being originally slated as his final meeting,” they explain.
When will the Fed announce its interest rate decision and how could it affect EUR/USD?
The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement at 18:00 GMT. This will be followed by Fed Chair Jerome Powell's press conference starting at 18:30 GMT.
The rate decision itself is unlikely to trigger a significant market reaction, but investors will scrutinize Fed Chair Powell’s remarks.
Powell is likely to reiterate that they need more time and data to assess whether high inflation will persist. Until now, Powell has refrained from hinting at a potential rate hike. In case he notes that option could be on the table in future meetings if the Middle East conflict prolongs and keeps Oil prices elevated, the immediate market reaction could help the USD gather strength against its rivals.
Although markets remain cautiously optimistic about a permanent truce between the US and Iran, the ongoing blockade of Iranian ports by the US military and Tehran’s reluctance to progress with negotiations until the blockade is removed don’t allow Oil prices to return to pre-war levels. The barrel of West Texas Intermediate (WTI), which was trading at around $65 before the US and Israel attacked Iran on February 28, seems to have settled above $90.
Conversely, market participants could start pricing in a September rate cut if Powell notes that the Fed will need to tilt its focus back to supporting the labor market once the situation in the Middle East is resolved. Investors could also assess Powell’s tone as being dovish if he pushes back against policy-tightening expectations and sounds optimistic about inflation quickly softening again, driven by a correction in Oil prices. In this scenario, the USD could come under selling pressure and pave the way for a bullish action in EUR/USD in the near term.
“We expect Fed Chair Powell to reiterate that the Fed’s current policy stance is appropriate, implying a high bar to resume easing. Watch out to see if Powell confirms any discussion on the next move being a hike,” BBH analysts note.
“Remember, the FOMC March meeting minutes highlighted that ‘many’ participants would favor rate increases to help bring inflation down to the 2% target in case of a lengthy war,” they further highlight.
Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:
“The technical outlook points to a lack of bullish momentum in the short term. EUR/USD trades slightly above the mid-line of Bollinger Bands and holds above the 100-day and the 200-day Simple Moving Averages (SMA). Additionally, the Relative Strength Index (RSI) indicator on the daily chart moves sideways slightly above 50.”
“On the upside, 1.1800 (Fibonacci 61.8% retracement of the February-April downtrend) aligns as the next resistance level before 1.1870 (upper Bollinger Band) and 1.1900-1.1910 (round level, Fibonacci 78.6% retracement). In case the pair drops below the 1.1700-1.1680 region, where the 100-day and the 200-day SMAs align, and settles there, technical sellers could show interest. In this case, the next important support level could be spotted at 1.1560 (Fibonacci 23.6% retracement) before 1.1500 (static level, round level).”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
- The Bank of Canada is widely expected to leave the interest rate unchanged at 2.25%.
- Policymakers will require more time to assess the impact of the Middle East war.
- Investors will be attentive to the bank’s inflation expectations for Canada.
The Bank of Canada (BoC) is widely expected to keep its monetary policy rate unchanged at 2.25% for its fourth consecutive meeting on Wednesday, requesting more time to assess the impact on inflation and economic growth from the US-Iran war. A shift in long-term inflation expectations emerging from higher energy prices due to the Middle East conflict could trigger the next big reaction in the Canadian Dollar (CAD).
The BoC left its monetary policy unchanged at its previous meeting in March and removed forward guidance references that the current rate is appropriate. The bank’s statement noted that economic growth had weakened in the first quarter of the year and that the energy shock from the Middle East war would keep prices at high levels in the near-term
Canada’s Consumer Prices Index (CPI) figures from March confirmed those views. Inflation accelerated to a 2.4% year-on-year rate from 1.8% in February, exceeding the BoC’s 2% target, yet falling short of the 2.5% expected by the market, which provides the central banks with some leeway to wait for additional data.
The BoC Governor, Tiff Macklem, practically discarded any immediate monetary policy reaction earlier in April. Macklem said that he is not concerned about the short-term spike in prices. The central bank’s latest CPI projections foresee inflationary pressures easing to 2.2% by the end of the year and 2.1% in 2027.
Furthermore, Canadian economic growth is starting to stutter with the trade relationship with its main partner, the United States (US), under review. The Gross Domestic Product (GDP) contracted at a 0.6% annualized pace in the fourth quarter of 2025. The monthly GDP barely rose 0.1% in January, according to the latest data released, and the IVEY Purchasing Manager’s Index (PMI) seasonally adjusted unexpectedly fell into contraction levels in March, suggesting that growth has remained sluggish in the first months of 2026. Unless this scenario changes radically, monetary tightening is likely to be off topic.
Looking forward, market analysts at TD Securities expect the BoC interest rate to remain steady for the foreseeable future: "We still expect the BoC to stay on hold for the rest of 2026, especially given the downside surprise on recent CPI. The recent moves higher in rates, particularly in BoC pricing further out, should be seen more as a function of importing the pricing out of Fed rate cuts rather than an accurate reflection of a change of outlook. December is currently priced in at 2.61%, and a return to pre-war levels will likely be slower rather than traded off a single dovish data point or communication."
When will the BoC release its monetary policy decision, and how could it affect USD/CAD?
The Bank of Canada will announce its policy decision on Wednesday at 13:45 GMT, and a press conference by Governor Tiff Macklem will ensue from 14:30 GMT onwards.
A report released by Reuters earlier this week revealed that the market is practically fully pricing steady interest rates after the April meeting, with 76% of the polled analysts expecting no change in the monetary policy in 2026.
The USD/CAD has been trading within a bearish channel since peaking near 1.4000 in late March. The pair has bounced up from nearly seven-week lows, at 1.3605, but upside attempts remain seen as good entry opportunities for sellers, rather than real recovery attempts.
On the upside, Guillermo Alcalá, FX Analyst at FXStreet.com, expects bulls to be challenged at the resistance area above 1.3700. “The pair found some support near 1.3600 to trim losses as the US Dollar (USD) picks up ahead of the Federal Reserve’s (Fed) meeting, which is also due on Wednesday. The pair, however, is likely to meet resistance at last week’s highs, right above the 1.3700 level. A confirmation above that level would signal a deeper recovery towards a previous support-turned-resistance in the area of 1.3800.
A rejection at those levels would confirm the bearish trend, according to Alcala: “The pair has reached the 78.6% Fibonacci retracement of the March bull run, a common target for corrections, but has not given clear signs of a trend shift as of yet. In this sense, Monday´s low, at 1.3597, remains on the bears' radar. Further down, the pair would need a dovish Fed or an even more unlikely hawkish surprise by the BoC, to extend losses towards the confluence of the channel bottom with March 9 lows, at the 1.3525 area.”
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- The Indian Rupee continues to underperform against the US Dollar amid rising oil prices.
- US President Trump warns of extending the blockade on Iranian sea ports.
- The Fed is expected to leave interest rates unchanged.
The Indian Rupee (INR) extends its decline against the US Dollar (USD) on Wednesday. The USD/INR pair rallies further to near 94.85, as oil prices have extended their advance, following comments from United States (US) officials on late Tuesday that President Donald Trump has instructed aides to prepare for an extended blockade of Iran, The Wall Street Journal (WSJ) reported.
At the press time, the WTI Oil price trades flat around $97.00 but gained sharply in the late Tuesday’s session to near $99.50, the highest level seen in almost three weeks.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
Investors fear extension of US blockade on Iranian ports
The WSJ report showed that the US President Trump has stated that the continuation of the blockade of Iranian sea ports is a preferred measure to push Tehran on the back foot in negotiating terms for a permanent ceasefire rather than bombing Iranian territory again.
The continuous US blockade of Iran means the prolonged closure of the Strait of Hormuz, a vital passage for almost 20% of global energy supply.
FIIs remain net sellers in Indian stock market
Overseas investors have emerged as net sellers for the seventh straight trading day on Tuesday, and have offloaded their stake worth Rs. 20,395.08 crore. Foreign Institutional Investors (FIIs) worry that “higher-for-longer” oil prices would be a major drag on India Inc.’s earnings projections by hitting their margins and diminishing households’ spending power.
Fed's policy takes center stage
On Wednesday, the major trigger for global markets will be the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT, in which the central bank is expected to leave interest rates unchanged in the range of 3.50%-3.75%.
The Fed is expected to warn of upside inflation and downside economic risks amid escalated energy prices. This will likely be the last Fed policy meeting by Jerome Powell as Chairman. Investors will pay close attention to Fed Chair Powell’s speech to get fresh cues on the US interest rate outlook.
Technical Analysis: USD/INR remains above 20-day EMA
USD/INR trades higher at around 94.85 at the press time on Wednesday. The pair holds a bullish near-term bias as spot remains above the 20-day exponential moving average (EMA) at roughly 93.66, keeping the recent advance supported.
The Relative Strength Index (RSI) around 64 suggests firm but not yet overbought upside momentum, reinforcing the constructive tone while leaving room for additional gains.
On the downside, immediate support is seen at the 20-day EMA near 93.66. As long as USD/INR defends this moving average, dips are likely to attract buying interest, and the broader uptrend is expected to stay intact. Looking up, the spot is expected to revisit the all-time high slightly above 95.00.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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