The meeting of the Federal Open Market Committee was held without surprises. Interest rates remained at the same level, optimistic rhetoric of policymakers also survived. But yet, the American dollar finished yesterday’s bidding with another weakening against the currencies of the main basket.
Even statements about the imminent balance-sheet reduction of the Federal Reserve by $4.5 trillion could not support the US dollar. Markets already heard this idea, and even this program will be start in September, as markets expected, phrase “relatively soon” was not denoted specific terms. Therefore, market participant continued to sell the American currency, because for return belief in greenback needs something more than common phrases.
Besides, serious concerns cause the limit of the US national debt. The Budget Committee of the US Congress has calculated, in that situation, if not raise the ceiling of the national debt, the government will run out of money by the middle of autumn. The last time this question was raised in 2015, and then Congress raised the plank at the very last moment. Maybe, and this time policymakers will pull to the last.
By forming a long-term forecast for the US dollar, you can count on two main events for avoid a technical default Congress will raise the debt ceiling, and the Fed will begin to reduce the balance-sheet. This will lead to a confident uptrend of the US dollar in autumn, but in the short term, the greenback will remain under pressure.