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US Dollar Maintains Consolidation Trend Amid FOMC Meetings

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US Dollar Maintains Consolidation Trend Amid FOMC Meetings

The US dollar held its ground Tuesday, as the Federal Open Market Committee kicked off its two-day meetings.

The greenback has traded cautiously to start the week, as investors size the likelihood of a second bond taper in as many months. Federal Reserve policymakers are scrutinizing the economic data to determine the pace and timing of future stimulus cuts. The central bank initiated the process last month, scaling back bond purchases by $10 billion. Since November 2008, the Fed has eased around $4 trillion into the financial markets.

Forex traders have been actively monitoring the Fed’s next move. Further stimulus cuts, it is believed, will pave the way for a future rate hike, which supports the US dollar.

The US dollar index held steady at 80.57 in North America’s afternoon session. The EURUSD and GBPUSD pairs tread water, whereas the USDCAD continued to pull ahead. The USDCAD pair soared 42 pips to 1.1157, a fresh four-and-a-half year high. Meanwhile, the USDJPY moved to higher ground, gaining 0.2 percent to 102.86.

Several pieces of important data made the rounds today, but their impact was relatively obsolete coming ahead of the Fed’s decision. US consumer confidence in January rose to the highest level in five months, according to the Conference Board. Meanwhile, orders for US durables fell 4.3 percent in December, a five-month low.

The Federal Open Market Committee’s next meetings won’t come until March 19-20. The economic landscape governing the Fed’s decisions could be considerably different at that time, making tomorrow’s announcement ever more pressing.

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