NEW YORK: The dollar rallied against a basket of currencies on Tuesday ahead of Wednesday’s Federal Reserve policy decision, while the British pound whipsawed after Prime Minister Theresa May defeated a rebellion in parliament over Brexit plans.
The Fed began its two-day meeting, where it is widely expected to raise interest rates for the second time this year. Earlier on Tuesday, data showed U.S. consumer prices rose in May, matching analysts’ forecasts and reinforcing the view the Fed would raise short-term interest rates gradually.
Reports that Fed Chair Jerome Powell was considering holding a news conference and taking questions after every Fed meeting also supported the dollar. The Fed currently holds a news conference after every other meeting and is scheduled to hold one on Wednesday.
The pound jumped before paring gains on Tuesday after British Prime Minister Theresa May saw off a rebellion in parliament over amendments to a bill for the country’s exit from the European Union next year that had threatened to undermine her authority.
“If you’re just trading headlines, you think that’s bad. But when you dig into the details … the amendment was throttled down with the understanding that there is going to be much more progress moving towards a softer Brexit further on,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.
The pound strengthened 0.3 percent against the dollar to $1.3424 after parliament voted to back the government on several amendments to the EU withdrawal bill. It then retraced its moves and finally settled around $1.3373.
Three of the world’s top central banks – the Fed, the European Central Bank and the Bank of Japan – meet this week.
“We’re eagerly awaiting the Fed, the ECB and the BOJ, in that order. People are reluctant to do a whole lot ahead of that,” said Gregory Anderson, global head of FX strategy at BMO Capital Markets in New York.
The ECB meets on June 14, when it could signal intentions to start unwinding its massive bond purchasing program. The Bank of Japan will meet June 14-15, but will not offer an immediate report following the meeting, instead publishing a summary of opinions on June 25.
The dollar index, which measures the greenback against a basket of six currencies, was last at 93.808, just below the day’s high of 93.911, boosted further by U.S. President Donald Trump’s stunning concession to North Korean leader Kim Jong Un on Tuesday about halting military exercises.