Dollar Index Eases Ahead of a Busy Day for Markets

It will be a busy day for the
markets today as investors expect to receive key information. One of the
biggest news will be the meeting between Liu He and his American counterparts.
The Chinese vice premier will meet with Robert Lighthizer and Steve Mnuchin as
the two countries tries to hammer a trade deal. While such talks have happened
before, investors are hopeful of a positive outcome. This is because the two
countries are under intense pressure to deliver a deal, which will help boost
the economy. The Chinese are also under pressure to hammer a deal with the US
because of the threat of tariffs. Already, a number of Chinese manufacturers
who export to the US have shifted operations to other countries like Taiwan and

In addition to this, traders will
receive the GDP numbers from the United States. These numbers are expected to
show that the economy expanded by 2.5% in the fourth quarter. This will potentially
be a lower growth compared to the 3.5% growth in the third quarter and the 4.5%
in the second quarter. This is might be an indication that the economy has
already absorbed the impacts of the tax cuts that were passed by the Trump
administration in 2017.

Traders will also receive jobs
numbers from the Automatic Data Processing (ADP). The company’s numbers usually
come two days before the official government numbers. The numbers are expected
to show that the private payrolls rose by 170K. This might be lower than last
month’s 271K. However, the number usually differs by a large margin than the
official government numbers. Further, traders will receive the pending home
sales numbers.

Perhaps the most important
information today will be from the Fed. The bank’s Federal Open Market Commitee
(FOMC) will conclude the two-day meeting today. Ultimately, the bank is
expected to leave interest rates at 2.50%. Therefore, since this is an expected
move, it may not move the market. However, traders will focus on the press
conference that will show the thinking of the Fed officials. Previously, the
dot plot chart showed that the bank will hike rates two times this year. In the
conference, traders will want to know more about the number of hikes and the
impact of the prolonged government shutdown.

The dollar index has remained
below the YTD high of 97.48. This is as the previous momentum has eased. In
case the Fed comes with a dovish statement, the index could decline to the $94
level while a hawkish statement may take the index higher.

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