Forex Today: Fed taper talk is sticking, US dollar rises

Here is what you need to know for Tuesday 14 September in forex:

The US dollar hit a two-week peak against a basket of currencies as measured in the DXY index on Monday. The bulls are back in action as the US Federal Reserve is expected to reduce its asset purchases before long, despite a surge in COVID-19 cases. The dollar index DXY earlier rose to 92.887, its highest since Aug. 27. It was last up slightly at 92.664 by the closing bell on Wall Street. US bond yields are a touch lower.

All eyes on the Fed

It is the Federal Reserve blackout period this week ahead of next week's FOMC meeting and the hawks have circled over 33 Liberty Street Manhattan, New York where the two-day meeting will take place over 21-22 Sep. Last week, most Fed officials sounded as if they are looking through the weak August jobs report and still want to taper this year. 

Philadelphia Fed President Patrick Harker became the latest official to say he wants the central bank to start tapering this year, saying in a Nikkei interview that he was keen to scale back asset purchases. The Wall Street Journal reported on Friday that Fed officials will seek an agreement to begin paring bond purchases in November.

There was no official data to note besides the August NY Fed’s measure of inflation expectations that rose to a record high. the week will get busier, starting with US Consumer Price Index tomorrow ahead of Retail Sales, production data as well as weekly jobs data towards the end of the week. 

Currencies vs the US dollar

Markets shrugged off the European Central Bank saying last week it would start to trim its own emergency bond purchases. The single currency was among the currencies to lose ground to the dollar. EUR/USD was dipping to $1.1770, its lowest in a little over two weeks. It moved back to 1.1810 by the close.  Against the yen, the US dollar was up 0.1% at 110 yen and it added 0.5% versus the Swiss franc to 0.9228. GBP/USD  steadied in after hitting a one-week high against the dollar on Friday, falling back to 1.3812 in New York before closing near 1.3840.  In the cryptocurrency market, bitcoin was down 2.8% at $44,762. Oil was pressured to the upside on Gulf production concerns and gold was firmer around 0.33% higher on the day tracking close to the $1,800 mark. 

The day ahead

For the day ahead, Aussie traders will be watchful over the Reserve Bank of Australia's officials speaking, including Philip Lowe, the central bank's governor, late in the session. UK employment data will be the next risk event at the turn of the European session.