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European Session – Dollar gains ahead of Fed policy announcement
March 19, 2014 2:32 pmVideo
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The market’s focus is on the Federal Reserve which concludes a two-day policy meeting later today. All eyes will be on the policy statement. The Fed is expected to cut another $10 billion from its monthly asset-purchase program, lowering its stimulus to $55 billion a month.
While tapering is widely expected, what is important to markets is whether there will be any tweaking of the Fed’s forward rate guidance and if there are any hints on the first rate hike.
Any dovish talk by Janet Yellen, who chairs her first policy setting meeting, will cap dollar gains.
US current account data today was better-than-expected and offered the greenback some support.
The dollar is up 0.06% against the euro after the US data. The euro has managed to keep above the 1.39 handle to trade at 1.3915. The Fed’s policy statement will be a key driver of this pair later today.
The pound gave up earlier gains made following some above-forecast UK jobs data but was still up 0.11% against the dollar to 1.6616. Sterling began to fall during the UK Finance Minister’s 2014 budget release.
The number of people claiming unemployment benefits in the UK fell in February by much more than expected, down by 34,600 last month, more than the 25,000 decrease that was forecast. Meanwhile, the ILO unemployment rate for the three months to January 2014 came in at 7.2% as widely expected and unchanged from the previous rate. The Bank of England minutes released today revealed that the MPC policy members felt growth was becoming more balanced although remained weak by historical standards.
The dollar was flat against the yen at 101.55 and struggled to rise above 101.60. If the Fed decides to continue with their tapering program, this should ease some of the pressure on the dollar.
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