U.S. Dollar Lower Before Fed Announcement
The U.S. dollar lost ground against its major opponents in the European session on Wednesday, as investors await the monetary policy announcement by the Federal Reserve amid expectations that it will strike a dovish tone due to rising coronavirus cases.
The Fed is set to announce its latest interest rate decision at 2:00 pm ET. No changes in policy are expected.
Chairman Jerome Powell will hold a press conference half an hour later.
All eyes are on the accompanying statement for clues regarding alternative policy tools, including the yield curve control.
On Tuesday, the Fed extended most of its emergency lending programs by three months, through the remainder of 2020.
Economic reports on U.S. pending home sales and wholesale inventories for June are due later in the day.
Political impasse over the $1 trillion fiscal rescue package by the U.S. added to worries.
President Donald Trump said on Tuesday he did not support everything in a $1 trillion Senate Republican coronavirus relief proposal but would not elaborate on what he didn’t not like.
The greenback depreciated to 1.2979 against the pound, its lowest level since March 10. On the downside, 1.31 is possibly seen as its next support level.
Data from the Bank of England showed that UK mortgage approvals increased sharply in June as the housing market reopened after the relaxation of restrictions to curb the spread of the coronavirus.
The number of mortgages approved in June rose to a three-month high of 40,000 in June from a record low 9,300 in May. Approvals were expected to rise to 33,900.
The greenback weakened to 1.1770 against the euro, after rising to 1.1711 at 5:00 pm ET. If the greenback extends decline, 1.195 is likely seen as its next support level.
Data from Destatis showed that Germany’s import prices declined at the slowest pace in four months in June.
Import prices declined 5.1 percent year-on-year in June, as expected, following May’s 7 percent decrease. This was the slowest fall since February, when prices were down 2 percent.
The greenback dropped to a 4-1/2-month low of 104.80 against the yen from yesterday’s closing value of 105.09. The greenback is likely to find support around the 101.00 region.
Fitch Ratings downgraded Japan’s sovereign rating outlook citing the sharp economic contraction caused by the coronavirus pandemic.
The outlook on ‘A’ rating was lowered to ‘negative’ from ‘stable’.
The greenback dipped to 0.9140 against the franc, a level unseen since May 2015. The next possible support for the greenback is seen around the 0.88 level.
The U.S. currency reversed from its early highs of 1.3387 against the loonie and 0.6646 against the kiwi, dropping to 1.3340 and 0.6680, respectively. The greenback is seen facing support around 1.29 against the loonie and 0.68 against the kiwi.
The greenback slipped to more than a 1-year low of 0.7194 against the aussie, from a high of 0.7149 seen at 9:30 pm ET. The greenback may face support around the 0.73 region, if it falls again.
Data from the Australian Bureau of Statistics showed that consumer prices in Australia fell 0.3 percent on year in the second quarter of 2020.
That beat expectations for a drop of 0.4 percent following the 2.2 percent increase in the previous three months.
The U.S. wholesale inventories and and pending home sales for June are due in the New York session.
The Federal Reserve announces its interest rate decision at 2:00 pm ET. Economists widely expect the central bank to keep benchmark rate in a range of 0 percent to 0.25 percent.