The U.S. dollar remained largely the currency of choice in early trading in Europe Wednesday, boosted by signs of a strengthening economy ahead of the latest meeting of the Federal Reserve.
The US Dollar Index Futures, which tracks the greenback against a basket of other currencies, had pushed up 0.1% to 97.90, trading around levels last seen in early December.
And more gains are possible given the apparent strength of the U.S. economy.
A closely-watched measure of U.S. consumer confidence impressed late Tuesday, jumping to its highest level since August, helped by low unemployment, mortgage rates and fuel prices.
This comes ahead of the latest rate-setting meeting of the Federal Reserve.
“We expect the Fed to keep its target range unchanged at 1.50-1.75% without making any major changes to the statement,” said Danske Bank, in a research note, echoing the view of most in the market.
Fed chair Jerome Powell is likely to be asked about his views on the recent developments surrounding the coronavirus in Asia, “but we expect him to state that it is one of the risks the Fed is monitoring. In other words, the Fed is probably not going to strike a dovish tone given the labour market continues to tighten and private consumption growth remains solid.”
The pair keeps looking to a potential test of the 1.0980 region, according to Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank .
This will give the Bank of England food for thought ahead of Thursday’s meeting, particularly after the stronger than expected PMI data last week.
The central bank is widely expected to cut interest rates in the near future, with money markets predicting a near 100% likelihood of a reduction in the next six months.