USD/PKR Range bounds as FOMC Policy Decision Looms

USD/PKR traded in a relatively tight range near the 155 mark on Tuesday, as market players were looking for indications if Washington would continue with a new round of tariffs on December 15th, or if an agreement with China could be reached before that deadline.

Meanwhile, on the US political front, Democrats in the House of Representatives unveiled on Tuesday formal charges against President Trump, accusing him of abuse of power and obstruction of Congress. Actions were taken as, according to Democrats, Trump had endangered the US Constitution, placed national security in jeopardy and undermined the integrity of the election next year. Consequently, the full Democratic-controlled House is to vote on the charges next week, while Donald Trump could become the 4th President in US history to face impeachment. It is not likely that Trump will be convicted in the Republican-controlled Senate.

The US Dollar Index was up 0.12% to 97.505 in late Asian trade on Wednesday.

Today’s focus will be on the US. At 13:30 GMT the Bureau of Labor Statistics is to report on consumer prices. The annualized consumer inflation in the country probably accelerated to 2.0% in November, according to expectations, from 1.8% in October.

The annualized core consumer inflation, which is stripped of prices of food and energy, is expected to remain stable at 2.3% in November.

If the general Consumer Price Index tends to approach the inflation objective set by the Federal Reserve (a level close to 2%), this would support USD.

The key event today will be the Fed’s decision on monetary policy at 19:00 GMT. The Federal Open Market Committee will probably keep the target range for the federal funds rate intact between 1.50% and 1.75% at its two-day policy meeting, scheduled to be concluded today, according to market expectations. The bank has cut borrowing costs three times this year, but has indicated that as long as there were no signs of economic activity slowdown, the labor market remained strong and inflation remained near the 2% objective, it was not likely to cut rates further.

The policy decision will be followed by a press conference with Fed Chair Jerome Powell.

As for the Fed’s policy meeting in March, CME’s FedWatch Tool showed investors now saw an 18.7% chance of a rate cut, down from 27.4% a week ago.

USD/PKR was gaining 0.43% to 154.995 in late Asian session on Wednesday.

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