Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

USD Outlook: Risk Appetite Versus Fed Taper Plans

By Kathy LienForexOct 20, 2021 23:34
USD Outlook: Risk Appetite Versus Fed Taper Plans
By Kathy Lien   |  Oct 20, 2021 23:34
Saved. See Saved Items.
This article has already been saved in your Saved Items
Stronger than expected earnings drove the Dow Jones Industrial Average to record highs. Despite Delta variant fears, rising prices and supply-chain shortage, bulge bracket U.S. companies are thriving. More than 85% of S&P 500 companies that reported as of Tuesday beat expectations in the third quarter. Results like these hardens the case for tapering by the Federal Reserve in November. Normally, the prospect of taper should be positive for the U.S. dollar and in many ways, it has for USD/JPY, which rose to its strongest level since November 2017. However, that’s where the greenback’s gains end as it traded lower against other major currencies. 
Proper policy communication has long been one of the most important jobs of the central bank, especially when major changes are anticipated. The fact that the U.S. dollar is not soaring with less than two weeks to the FOMC meeting is a testament to the Fed’s success. It said it would prepare the market for any change and it has done a decent job doing so. There’s little doubt that it won’t act in November and, by now, investors have completely priced in the move. This explains why good data and record-breaking moves in equities did not drive the U.S. dollar higher. 
The Beige Book report was also slightly more downbeat, with reports of slower growth. More specifically, it said: “Outlooks for near-term economic activity remained positive, overall, but some districts noted increased uncertainty and more cautious optimism than in previous months.” 
Ultimately the greenback is a safe-haven currency, and with stocks hitting record highs, investors are moving their money into riskier currencies, like the Australian and New Zealand dollars. They are more sensitive to global growth and the ebbs and tides of the global economy.
Although, sterling and the Canadian dollar traded higher today. U.K. inflation data fell short of expectations, while Canada’s CPI report beat. Consumer prices grew 0.3% in the month of September, down from 0.7% the prior month in the U.K. Year-over-year growth eased to 3.1% from 3.2%. Many economists are warning investors not to the fooled by this downshift because the slowdown was largely due to a measurement quirk. A meal subsidy scheme in August pushed up last month’s inflation readings. High price pressures remain a problem that worries the Bank of England. In Canada, CPI rose 0.2%, slightly more than expected. Year over year, the annualized pace of growth rose to 4.4% from 4.1%. USD/CAD dropped to fresh three-month lows in response. The Australian and New Zealand dollars continued to lead the gains. The euro also participated, thanks to stronger German producer prices.   
USD Outlook: Risk Appetite Versus Fed Taper Plans

Related Articles

USD Outlook: Risk Appetite Versus Fed Taper Plans

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email