Dollar underpinned by rising U.S. yields as Fed meets
The dollar rose against a basket of currencies on Wednesday, underpinned by lofty U.S. yields, after upbeat consumer spending data kept alive expectations the Federal Reserve would raise interest rates. Two-year Treasury yields reached their highest in over four years and long-dated U.S. yields their highest in nearly two months before a Fed meeting that starts on Wednesday.
The rise in two-year yields widened the spread between U.S. and German government bonds to its highest in eight years and helped the dollar recover.
The dollar index was up at 95.714, off a two-week low struck on Monday, but nowhere near the highs of 96.616 hit in early September on doubts over whether the Fed will hike rates.
GBP/USD hovers near daily lows ahead of US ADP report
The spot is hovering a few pips away from the daily low of 1.5264. Sterling came under pressure after having suffered a bearish daily close below 1.5330 (July 8 low) on Tuesday. The slightly upbeat UK construction PMI released earlier today failed to put a floor under the cable.
Sterling could suffer loss for the seventh consecutive day if the ADP report shows the private sector added more than the expected 200K jobs in August. Furthermore, the sentiment on the could also play a major role in deciding the trend ahead. At the moment, the major equity index futures in the US are trading moderately higher. .
Pound falls to 2-week lows vs. stronger dollar
The pound fell to two-week lows against the U.S. dollar on Tuesday, as expectations for a U.S. rate hike in the coming months continued to lend broad support to the greenback.
GBP/USD hit 1.5385 during European morning trade, the pair’s lowest since May 8; the pair subsequently consolidated at 1.5415, sliding 0.36%. Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5591, the high of May 20. The dollar was boosted after Federal Reserve Chair Janet Yellen reiterated Friday that the bank still expects to start raising interest rates later in the year if the economy continues to improve as expected.
| Important events and their explanation: |
| Time ( IST) | Currency | Economic Data | Actual | Expectation | Previous |
| 6:00pm | USD | Building Permits | 1.15M | 1.13M | |
| USD | Unemployment Claims | 276K | 275K | ||
| USD | Current Account | -111B | -113B | ||
| USD | Housing Starts | 1.16M | 1.21M | ||
| 7:30pm | USD | Philly Fed Manufacturing Index | 6.1 | 8.3 | |
| 11:30pm | USD | FOMC Economic Projections | |||
| USD | FOMC Statement | ||||
| USD | Federal Funds Rate | <0.25% | <0.25% |
Explanation:- We are just one behind the most crucial event of the year, FOMC meeting. As many people have already expected that FED may raise intrest rate by 25bps and we assume this news have already discounted. But what not discounted is Dovish tone. Hence any dovish tone is negative for the USD.
| Quick Glance : |
| Instrument | Price | %Chg | Volume | OI |
| USD/INR | 66.43 | 0.17 | 788526 | 960103 |
| EUR/INR | 74.55 | -0.82 | 37048 | 48836 |
| GBP/INR | 102.47 | 0.07 | 21059 | 41217 |
| JPY/INR | 55.12 | -0.64 | 7908 | 15311 |
| Technical touch : |
USDINR
USDINR pair is forming a bullish pennant in a daily chart, hence breakout above 66.78 may lift the price till 67.40 levels.
