US dollar perks up to start Fed day

The US dollar is at the best levels of the day as North American traders greet a double-day of central bank decisions. First up is the Bank of Canada at 9:45 am ET and then at 2 pm ET we get the FOMC.

The dollar bid undoubtedly highlights some angst about tariffs as the White House continues to talk about imposing them on Mexico, China and Canada on the weekend. Treasury yields pulling in the opposite direction of the dollar as they decline 2-3 bps across the curve.

Here’s BMO’s Ian Lyngen on tariffs:

“Backing into a rough
guestimate of the impact of tariffs on the go-to inflation measures is arguably
the ‘easy’ part, while creating a reasonable projection for how shifting demand
preference and substitution trends will ultimately impact real growth is far
more complex and entails less concrete assumptions.”

There are also the questions of how other countries could retaliate and how much government stimulus could be enacted.

Finally, there could be some demand for US dollar as buyers dip back into US tech stocks following the rout on Monday.

This article was written by Adam Button at www.forexlive.com.