Euro refreshes monthly low against US Dollar as traders price out dovish Fed bets

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.32%	0.41%	0.05%	0.20%	0.86%	1.00%	0.25%
EUR	-0.32%		0.08%	-0.26%	-0.13%	0.54%	0.72%	-0.06%
GBP	-0.41%	-0.08%		-0.34%	-0.21%	0.46%	0.62%	-0.15%
JPY	-0.05%	0.26%	0.34%		0.16%	0.80%	0.96%	0.20%
CAD	-0.20%	0.13%	0.21%	-0.16%		0.64%	0.78%	0.05%
AUD	-0.86%	-0.54%	-0.46%	-0.80%	-0.64%		0.17%	-0.61%
NZD	-1.00%	-0.72%	-0.62%	-0.96%	-0.78%	-0.17%		-0.76%
CHF	-0.25%	0.06%	0.15%	-0.20%	-0.05%	0.61%	0.76%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% higher to near 99.20.

The CME FedWatch tool shows that the possibility of the Fed holding interest rates at their current levels by the year-end is almost 51.1%, while the rest are supporting at least one interest rate hike.

Traders priced out dovish Fed bets due to rising US inflationary pressures amid higher energy prices. The data showed on Tuesday that the US headline Consumer Price Index (CPI) grew strongly by 3.8% Year-on-Year (YoY), the strongest growth seen in almost three years.

Increasing hawkish Fed bets have also boosted US bond yields. 10-year US Treasury yields post a fresh almost a one-year high at 4.54%.

In addition to squeezed dovish Fed bets, improving trade relations between the United States (US) and China have also strengthened the US Dollar.

On the Euro front, the recent Reuters poll has shown that a significant majority of economists anticipated the European Central Bank (ECB) to raise interest rates in the June policy meeting.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

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.

How often does the Fed hold monetary policy meetings?

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.

What is Quantitative Easing (QE) and how does it impact USD?

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.

What is Quantitative Tightening (QT) and how does it impact 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.