Will the U.S. dollar experience sharp fluctuations at the FOMC meeting following the release of the U.S. CPI? Caution is advised.

Will the U.S. dollar experience sharp fluctuations at the FOMC meeting following the release of the U.S. CPI? Caution is advised.

13.12.2023

In U.S. currency markets yesterday, the U.S. dollar recovered from a temporary decline and rose during U.S. trading hours after the U.S. November Consumer Price Index (CPI), released yesterday, showed a year-over-year increase of 3.1%, down 0.1 percentage points from the previous month’s 3.2%.The USD/JPY pair fell from 146.163 to 144.734 before recovering to 145.822. During today’s Asian trading session, the pair has shown no clear direction and is stagnating just below the 20-period moving average (MA) on the hourly chart. We should remain vigilant as to whether today’s FOMC meeting will trigger significant movements in the U.S. dollar.

Ahead of tomorrow’s Swiss National Bank (SNB) policy rate announcement, the Swiss franc strengthened against the Japanese yen, second only to the yen among European currencies. The USD/CHF pair fell from 0.8788 to 0.8721.This marks the second consecutive day of decline following a touch of the 20-day moving average on the daily chart. We need to carefully assess whether the Swiss franc will continue to strengthen against the U.S. dollar or whether currency strength and weakness will remain in balance, depending on the FOMC announcement early this morning and tomorrow’s SNB announcement.

Today, at 16:00: UK GDP, UK Industrial Production, UK Manufacturing Production, and Sweden’s Services PMI; at 19:00: Eurozone Industrial Production; at 20:00: South Africa’s Retail Sales;at 8:30 p.m., India’s money supply; at 9:00 p.m., the U.S. MBA Mortgage Applications Index; at 10:30 p.m., the U.S. Producer Price Index; at 2:00 a.m., the announcement of the U.S. FOMC policy rate and statement; and at 2:30 a.m., a press conference by U.S. Federal Reserve Chair Powell.We need to remain highly vigilant regarding price movements, as the U.S. dollar may experience sharp volatility following the release of the U.S. CPI and the subsequent FOMC meeting.