CURRENCIES: Dollar Eases In Run-up To Fed Decision; Pound Briefly Rallies Above $1.36
September 20 2017 - 6:14AM
Dow Jones News
By Carla Mozee, MarketWatch
Fed statement due at 2 p.m. Eastern
The U.S. dollar slipped against major rivals Wednesday before
investors hear the Federal Reserve's statement on interest rates
and its massive bond-buying program, while the pound made a notable
drive higher after British retail sales figures blew past
expectations.
The ICE U.S. Dollar Index , which measures the greenback against
six of its rivals, shed 0.2% to 91.681, on course for a second
session of losses.
The dollar's direction on Wednesday will be largely in the hands
of the Fed, whose policy statement is due at 7 p.m. London time, or
2 p.m. Eastern Time. Chairwoman Janet Yellen will hold a press
conference at 2:30 p.m. Eastern Time.
But the greenback did see action against the pound ahead of the
Fed statement, as traders pushed sterling to an intraday high of
$1.3608, around the highest level since the U.K.'s June 2016 Brexit
referendum.
The pound zoomed above $1.3600 after U.K. retail sales in August
grew 1% month-over-month, well above the 0.2% rise
(http://www.marketwatch.com/story/uk-retail-sales-rise-faster-than-expected-2017-09-20)
in a FactSet consensus estimate. But sterling didn't hold above
that level for long, moving back to $1.3556.
"Sterling has found a reason to move on the back of the news,
having been directionless over the week so far. With non-food price
inflation hitting multi-year highs, there is certainly plenty of
rationale for [Bank of England Governor] Mark Carney to begin a
gradual hiking process, but the limited reaction from sterling show
that the market is still rather cautious," said IG chief market
analyst Chris Beauchamp in a note.
Sterling late Tuesday fetched $1.3511.
Fed on deck: The Fed is widely expected to say it will start
reducing its $4.5 trillion portfolio of government securities. An
interest-rate hike isn't expected at the end of the central bank's
two-day meeting, and investors see a 56% chance the Fed will raise
rates in December
(http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/),
according to CME Group.
"The dollar would likely rally if the Fed were to reiterate the
median expectation of another rate hike this year and three in
2018," said Guy Stear, head of emerging markets strategy at Société
Générale, in an note.
"Balance sheet reduction on the other hand is broadly expected.
Given robust risk sentiment, a hawkish Fed surprise is likely to
incite a sharp bound in the USD/JPY, which remains tied to the
twists and turns of U.S. interest rates," he said.
The dollar was down against the Japanese yen , trading at
Yen111.28 compared with Yen111.60 late Tuesday in New York.
The euro traded at $1.2014, up from $1.1994 on Tuesday. The
greenback also lost ground against the Canadian dollar , buying
C$1.2239 versus C$1.2295 in the previous session.
See:Fed to take historic leap into the unknown
(http://www.marketwatch.com/story/fed-to-take-historic-leap-into-the-unknown-2017-09-14)
Also read:Why the bond market isn't freaking out about the Fed's
shift to quantitative tightening
(http://www.marketwatch.com/story/why-the-bond-market-isnt-freaking-out-from-the-feds-shift-to-quantitative-tightening-2017-09-14)
(END) Dow Jones Newswires
September 20, 2017 05:59 ET (09:59 GMT)
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