USD Takes Losses to Improving Commodity Based Currencies Ahead of Fed Week

USD

The U.S. Dollar lost some ground in earlier trading sessions as markets prepare for a week loaded with central bank decision and crucial data. Last week, the greenback climbed by over 2.0% according to the Bloomberg Dollar Spot Index, primarily as a result of hawkish build-up to the Fed chances of a hike before the year ends as well as the chaos in commodity prices. For most voting members of the Fed, the economy seems strong enough to withstand an increase in borrowing costs.

We may see an ongoing resurgence for resource-based currencies as the Yuan appreciated overnight by 15.0%, a sign that CNY will hold more purchasing value and China is more willing to use currency strength to make purchases of imported products.

There will not be any speeches or commentary prior to Wednesday’s Fed meeting, shining the spotlight on any word out of Japan. BOJ is set to make its policy decision announcement earlier the same day.

EUR

The Euro has fallen by 1.3% since September 8th as anemic economic growth as well as political turmoil clouds the prospects for euro strengthening and puts pressure on the European Central Bank to consider expanding stimulus in what is left of 2016. Over the weekend, the Alternative for Germany party, an opposing force to Chancellor Angela Merkel’s current coalition government, succeeded in earning 14.0% of votes to Berlin city council.

The results were unexpectedly great from the anti-immigration rightist movement. Merkel’s party had not experienced such a loss in years and Berlin’s council is now as diverse as ever.

GBP

Sterling is on the rise after Chancellor of the Exchequer Philip Hammond admitted to be willing to accept that the United Kingdom will exit the European Union’s single market. Pound is trading at its strongest level in a month following the markets’ assessment that post-Brexit economic numbers have proven stronger than predicted. Although BOE easing is forecast for later on in the year, the economy seems to be holding steady and Brexit looks manageable for now.