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The Fed meeting is on Wednesday and the focus is on discussions around bond purchases and insight into the bank’s comfort with surging inflation, with the upshot for currency markets not clear cut.
Commonwealth Bank of Australia strategist Joe Capurso said a hint that tapering could soon begin would lift the dollar.
Steve Englander, head of G10 FX research at Standard Chartered, however, said that a steer on the Fed’s thinking about a sharp but likely transitory jump in inflation will be just as important.
“We expect that Fed Chair (Jerome) Powell will convey more patience than many recent Fed speakers about bringing inflation lower, as long as domestic economic conditions still point to labor market slack,” said Englander in a note to clients.
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