The dollar bounced off a two-year low on as dollar selling pressure faded ahead of a Fed and on hopes for the next U.S. stimulus package.
The Fed, which begins a two-day meeting on Tuesday, will probably reiterate its accommodative policy stance. Investors do not expect any policy change at the Fed meeting on Wednesday. But they expect to hear its super-easy outlook reaffirmed. Further, they are speculating about a change in emphasis in the forward guidance.
On the horizon is also Friday’s deadline for U.S. Congress to extend unemployment benefits. A big U.S. fiscal package is currently deadlocked in negotiations between Democrats and Republicans. The Republican leadership of the U.S. Senate introduced a proposal for the next coronavirus relief package, a $1 trillion plan called the Heals Act. But concerns remained over the details. The proposal sparked immediate opposition, with the Democrats claiming it was too limited.
The economic impact of curbs to restrict the virus spread and of job losses are only beginning to be felt.
Against a basket of currencies, the dollar lifted from a two-year low of 93.492 to hit 93.918. Still, the greenback is down 3.6% in July. It will need a stronger bounce to avoid posting its worst month in almost a decade.
On the Brexit front, the European Union says a deal needs to be done by October. This will allow time for ratification by the end of the year. Both sides have said the talks may be stalling. That uncertainty was reflected in the currency derivative markets.
START TRADINGForex – Dollar Selling pressure fades ahead of FED
U.S consumer confidence and manufacturing data will also give markets the latest read on progress in the U.S. economic recovery.
The Japanese yen rose 0.2% versus the U.S. dollar to 105.18.
The euro retreated from its two-year high on Tuesday and it was last 0.2% softer at $1.1725.
The Australian dollar gave up early gains dip 0.2 to $0.7133.
The New Zealand dollar touched an eight-month top of $0.6702. Kiwi then dipped back to $0.6656. The New Zealand dollar fell the most against the greenback, sliding 0.6% to 0.6644.
The pound retreated from a four-month high on Tuesday as a broad U.S. dollar rout over the past week ran out of steam. Also, negative news from Brexit negotiations prompted hedge funds to take profits.
The sterling slipped 0.02% lower versus the dollar at $1.2878 after rising to its highest level since March. The UK currency was little changed against the euro at 91.14 pence.
Gold fell as much as 1.8% on Tuesday from an all-time peak as the dollar selling pressure faded. Spot gold was 0.5% down at $1,931.84 per ounce by 1136 GMT. The precious metal retreated from a record $1,980.57 hit earlier, as traders took profits. Safe-haven gold has rallied about 27% so far this year, mainly supported by doubts over an economic recovery from the pandemic.
Silver fell more than 9%, with the focus turning to the U.S. Federal Reserve policy stance.
Oil prices were steady on Tuesday, with demand worries due to a rise in coronavirus cases worldwide. Brent crude was up 7 cents, or 0.2%, at $43.48 a barrel at 1052 GMT. West Texas Intermediate (WTI) U.S. crude fell 19 cents, or 0.5%, to $41.41 a barrel.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money