Dollar steady against euro, Fed meeting in focus
NEW YORK (Oct 29) - The dollar was steady against the euro on Tuesday as investors awaited for the outcome of the U.S. Federal Reserve meeting on Wednesday, while sterling was choppy as Britain looked likely to head to an election in December.
The Fed is expected to cut rates on Wednesday and investors will be watching for any indication that further cuts are likely. Fed policymakers are deeply divided on whether the U.S. central bank should be cutting rates.
The dollar may gain if the Fed indicates that further cuts may not necessarily be forthcoming.
“We’re looking for a hawkish reaction, which would lean toward a stronger dollar,” said Mark McComick, North American head of FX strategy at TD Securities in Toronto.
“Given that markets are looking for the Fed to prop up the economy over the coming months, I think them signaling a little bit of a pause would kind of reinforce some consolidation in the dollar, especially against euro and sterling which have been driven by the Brexit euphoria,” he said.
Increasing optimism that Britain will reach a deal to avoid a disorderly exit from the European Union has supported the euro and sterling in recent weeks.
Britain was heading towards a December election after Prime Minister Boris Johnson’s bet on breaking the Brexit deadlock with an early vote gained support from opposition parties.
The EU on Monday agreed to a 3-month flexible delay to Britain’s departure.
Sterling has gained to $1.2848 from $1.2193 on Oct. 8, but is below a five-month high of $1.3012 reached on Oct. 21.
The Australian dollar climbed for a third consecutive session against the greenback on optimism that the U.S. and China will make progress on reaching a trade agreement.
U.S. President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.
The Australian economy is highly correlated to Chinese economic strength.
The dollar index against a basket of six major currencies fell to session lows after data showed that consumer confidence unexpectedly fell in October.
Reuters
