On Tuesday, the foreign exchange market began in a subdued manner. Bidders are waiting for significant events including two meetings of the largest central banks of the ECB and the Federal Reserve, as well as the publication of data on inflation in the United States.

If the Fed's monetary policy decision matched the expected 0.25% to 1.50% interest rate hike, the ECB can expect a surprise which can be expressed in a different rhetoric; for example, hinting for an increase in inflation. The regulator can reconsider its attitude to the incentive program before it is expected. As for the market, there may be enough phrases implying that incentive measures will not in any way expand.

However, this is an optimistic option. Alternately, the absence of any changes in the monetary policy in the long term would be considered as negative a single European currency.

Tomorrow, the US dollar may receive support despite the outcome of the Fed meeting on monetary policy and the main reason for this is not even an increase in interest rates. Instead, this was influenced by a hawkish statement by the Fed about economic growth prospects, inflationary pressure and interest rate hikes. The impetus for the upward dynamics may be the revival of consumer inflation, and the data of which will be presented tomorrow. If the figures for the base consumer inflation are higher than the expectations for growth in annual terms of 1.8%, it will stimulate the market to buy the dollar.

But again, the currency market is not expected to come out of the range despite the probable positive outlook. This will most likely remain until the end of the year. In our opinion, a Christmas rally should also not be expected with the main reason of expecting the adoption of the tax code in the United States. Its final appearance will most likely act as the driver that can stimulate the strengthening of the dollar at the beginning of next year. Prior to the publication of the final version of the document, one should not expect any noticeable changes in the foreign exchange market.

Forecast of the day:

The EUR/USD pair is consolidating in the range of 1.1775-1.1800. It can break into a wider range at 1.1730-1.1800, but today, it will most likely remain narrow in the wake of the expectations regarding the outcome of the Fed meeting and the ECB.