Dollar Traders Countdown To The FOMC Decision
Fx Empire | Jul 29, 2014 03:17AM ET
The time is counting down to the BIG Federal Reserve meeting. The US Dollar continued to climb trading this morning at 81.14. The dollar held steady near a six-month peak against a basket of major currencies on Tuesday, as investors kept to the sidelines ahead of a policy review by the Federal Reserve. The Fed is sure to cut its monthly bond-buying programme by another $10 billion as it looks to wind up the scheme later in the year, but the focus for markets is on any clues to the timing of the first interest rate hike. With other key data such as US gross domestic product and the closely watched non-farm payrolls report still to come, investors were content to sit on their hands. July’s Consumer Confidence reading is in focus, with expectations suggesting the index will rise to a six-year high of 85.4. The outcome may help to set the stage for an overstuffed week of high-profile US releases including the FOMC policy announcement, the second-quarter GDP reading and July’s nonfarm payrolls number.
The dollar was little moved against the euro and yen on Tuesday as investors await the US Federal Reserve’s latest policy meeting as the bank’s head faces calls to hike interest rates earlier than she has indicated. The greenback stood at 101.88 yen, compared with 101.85 yen in New York on Monday. The euro bought $1.3434 and 136.90 yen.
Fed board members kick off their meeting on Wednesday and while they are expected to keep rates at record lows and further cut their stimulus programme investors are hoping for an indication that monetary policy could be tightened soon. With the economy getting back on track, Janet Yellen is facing growing calls to take a more hawkish stance to quell what some analysts warn are overheated asset markets and bubbles in some sectors. More economists suggest say the Fed bring forward its plan to lift interest rates to the end of this year, instead of late 2015 as previously indicated.
Richard Fisher, the hawkish head of the Federal Reserve’s Dallas branch, said in a newspaper piece on Sunday that the country is experiencing financial excess that is “of our own making”.
Friday’s non-farm payrolls report for July is expected to show 230,000 jobs were added in July, a modest pullback from the 288,000 added in June. Economists surveyed by The Wall Street Journal expect the economy grew 3 percent in the second quarter, bouncing back from a 2.9 per cent contraction in the first. Yesterday saw one disappointing read on the economy. The National Association of Realtors said its index of pending home sales fell, indicating continued softness in the housing market. Economists had expected a rise.
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This morning, Asian markets started the week with a risk on sentiment. Chinese equities outperform as Chinese officials gave some optimistic quotes on the Chinese recovery. The dollar was holding within reach of the recent highs against the euro and the yen, but recorded no additional gains. Geopolitical tensions in Ukraine and in the Middle East kept European investors side‐lined.
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