USD is strong. Overview for 21.08.2023

The market's most traded currency pair is neutral on Monday. The current EURUSD exchange rate stands at 1.0889.

The currency market's sympathies remain on the side of the US dollar, owing to both the global risk aversion of investors and the content of the minutes of the last Fed meeting.

Signals from China are mixed, with most of them still worrying investors. Everyone is waiting for important decisions on economic stimulus, but so far, no such measures have been announced.

The US Federal Reserve will meet again on 19 and 20 September to decide on the interest rate. According to the CME FedWatch monitor, the market expects the interest rate to remain unchanged in the target range of 5.25-5.50% per annum. The probability is 89%, with 11% of market participants anticipating a 25-basis point increase in borrowing costs. As for the meeting on 1 November, the percentage of pessimists betting on an increase is already at 33%.

The news flow confirms that there are grounds for continuing the trend towards monetary tightening in the US, like the rise in core inflation, producer price index, and retail sales. While consumers are adapting to the high prices, the Fed in its stringent approach to combat inflation, is unlikely to tolerate the situation. 

There are no critical statistics in the macroeconomic calendar today, so the leading currency pair will continue to focus on already-known factors.