An early word on the Federal Reserve meeting this week and the dollar as the U.S. central bank begins a two day meeting today. The outlook for the dollar has to be lower. As discussed repeatedly, after the last Fed meeting this was always going to be a weak quarter for the dollar but with the lack of tapering going forward, the dollar outlook remains weak well into the first quarter.
Last week’s U.S. jobs report did nothing to change expectations that the U.S. central bank will continue its current asset purchase program well into next year. That compares with other central banks, notably the European Central Bank and the Bank of England, that are expected to cut back their similar stimulus measures. Just a few months ago the Fed was considered to be the first bank that would throttle back. No longer. Polls of U.S. primary dealers indicate the Fed will only start to cut back its monthly purchases in March at the earliest.
Investors will be looking for any changes to the Fed’s views in Chairman Ben Bernanke’s third to last meeting but that is about all.
The dollar could move on anything unexpected but any move higher will be fleeting. This is no time for large bets on the U.S. currency.