Dollar Up From 13-Month Low Ahead Of Fed Decision

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The U.S. dollar is up from 13-month lows against the other major currencies on Wednesday as investors awaited the result of the Federal Reserve’s latest policy meeting and decision later in the day.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.09% at 94.00, moving away from Tuesday’s 13-month low of 93.46.

FOMC Statement

The Fed is widely expected to keep policy on hold, but Investors were hoping that the Fed’s rate statement, due later Wednesday, will reveal more about policy plans for the second half of the year, with markets paying close attention to details of when and how the Fed will start reducing its $4.5 trillion balance sheet.

Doubts over the Feds plans for a third rate hike this year have recently weighed on the greenback.

Markets have reduced expectations for a U.S. interest rate increase in the coming months with expectations of another rate hike at less than 50 percent before the end of the year.

“If there is no change in the language of the statement, we can expect a mild dollar rally and there would be a better opportunity for the Fed to communicate its policy expectations at Jackson Hole next month,” said Ulrich Leuchtmann, a currency strategist.

Investors also stayed focused on the investigation into alleged links between U.S. President Donald Trump’s administration and Russia in last year’s election.

On Monday, Jared Kushner, Trump’s son-in-law and a senior White House adviser, told Senate investigators he had met with Russian officials four times last year but said he did not collude with Moscow.

Investors fear the persistent political turmoil will disrupt the Trump administration’s pro-growth economic agenda of tax cuts and infrastructure spending, which helped propel the dollar to 14-year peaks after the November election.

Dollar Against Other Currencies

Euro against the dollar was little changed at 1.1627, off session lows of 1.1613, while the sterling edged up against the greenback 0.09% to 1.3040, erasing earlier losses, after the U.K. Office for National Statistics said gross domestic product rose by 0.3% in the three months to June, from 0.2% growth in the first three months of the year, wherein economists had forecast growth of 0.3%.

On a year-over-year basis the economy expanded by 1.7% from 2.0% in the first quarter, also in line with forecasts.

Moreover, the dollar was little changed against the safe-haven yen at 111.91, while it climbed against the swiss franc 0.60% to trade at 0.9581.Lastly, the Australian dollar remained weak, with the Aussie dollar down 0.23% at 0.7919, while the New Zealand dollar or kiwi added 0.18% to 0.7431.

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Dollar Continues To Slump, Sinks To 10-Month Lows

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The U.S. dollar continues to slump as it sank to 10-month lows against the other major currencies on Tuesday, after an attempt to pass healthcare reform collapsed and amid a sell-off ignited by another setback to U.S. President Donald Trump’s agenda and doubts over prospects for another rate hike this year.

Greenback Sinks Against Major Currencies

The U.S. dollar index against a group of six major currencies was 0.64% lower at 94.31, the lowest trough since September 9, 2016.

The dollar was at almost three-week lows, weaker against the yen, with USD/JPY down 0.55% to 112.00, after falling as low as 111.99 overnight.

The euro rose to fresh 14-month highs against the dollar, with EUR/USD advancing 0.86% to 1.1577, after touching overnight highs of 1.1538.

Sterling was lower, with GBP/USD down 0.26% to 1.3022 after data showing that the annual rate of inflation in Britain fell for the first time since October last month.

Healthcare Issue and Rate Hike

The dollar came under renewed selling pressure after a second attempt by Republicans to replace Obamacare collapsed late Monday, bringing a major policy blow to the Trump administration.

Around half of the cuts in healthcare spending were reserved to finance proposed tax cuts. The failure to deliver healthcare reform added to disappointment over the lack of progress on Trump’s economic agenda.

The dollar was already on the defensive side after Friday’s weak U.S. inflation and retail sales data that  added to doubts that the Fed will be able to raise interest rates again this year.

Other Currencies

Elsewhere, the Australian dollar jumped to two-year highs, with AUD/USD,  adding 1.59% to trade at 0.7926, after the minutes from the central bank’s last policy meeting showed it turning more positive on the economic outlook.

The New Zealand dollar was also higher, with NZD/USD rising 0.61% to 0.7364. The kiwi initially turned lower overnight before regaining ground after weak inflation data indicated that the country’s central bank will keep interest rates on hold for longer.

The Canadian dollar hit fresh 14-month highs, with USD/CAD last at 1.2624.

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Dollar Increases Gains Against Other Currencies

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The dollar extended gains against the other major currencies on Monday, pulling away from nine-month lows, but the greenback’s upside was expected to stay limited amid expectations for tighter monetary policy by major central banks.

The euro dropped against the dollar 0.51% to 1.1369, off Friday’s 13-month peak of 1.1448, while the sterling declined 0.47% to 1.2967, pulling away from last week’s six-week high of 1.3032.

The dollar index against a group of six major currencies was 0.50% higher at 95.86, crawling off a nine-month trough of 95.470 plumbed on Friday.

In last week’s comments, the heads of the European Central Bank, the Bank of England and the Bank of Canada embraced a more aggressive view on monetary policy, indicating that they were getting ready to join the Federal Reserve in policy tightening.

Aggressive signals from foreign central banks contrasted with doubts over whether the Fed will be able to carry out hike rates again this year given a recent batch of weak U.S. economic data and growing skepticism that the Trump administration will be able to deliver on its pro-growth agenda.

Elsewhere, the greenback rallied against the yen and swiss franc 0.55% to 113.04 and 0.50% to trade at 0.9626, respectively. Meanwhile, the aussie dollar and kiwi were weaker against the dollar, down 0.44% to 0.7656 and 0.55% to 0.7292, respectively.

The yen briefly rose after Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in Tokyo on Sunday, in a vote that could be a harbinger for national elections.

“The Tokyo election won’t have a strong market impact, in my view, as there are no opposition parties in Japan that can immediately replace the (ruling) LDP,” said Yukio Ishizuki, a senior currency strategist.

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Pound Dives After UK Election Upset

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Britain’s pound took a battering dive on Friday, staying at its two-month lows, after Prime Minister Theresa May’s Conservative Party lost its parliamentary majority in elections, plunging the country into potential political chaos days before the start of Brexit negotiations.

Sterling fell 1.6% to $1.2748 after sliding as much as 2.5% to $1.2636 in early European trade , its weakest level since April 18.

With no clear winner emerging from Thursday’s election, Prime Minister Theresa May was fighting to hold on to her job on Friday as she faced calls to quit after her election gamble to win a stronger mandate she had sought to conduct exit talks with the rest of the European Union failed, leaving no single party with a clear claim to power just 10 days before the start of negotiations on Britain’s divorce from the European Union.

Lee, Hardman, a currency strategist in London, said the market wants more clearness now as far as who will be the next Prime Minister, what kind of form will the government take and eventually how all that feeds through into upcoming Brexit negotiations are concerned.

“In the near term the increased political uncertainty and the risk of more disorderly Brexit negotiations should enforce pound weakness.”

The surprise of a result that raised questions about how Britain will go on with its plan to leave the EU, and whether any party can form a stable government, sent the pound to eight-week lows against the dollar and its lowest levels in seven months versus the euro.

After falling sharply on an exit poll released when polls closed at 21:00 GMT, which showed Britain was set for a hung parliament, the pound had steadied a little in Asian trading. However, it fell sharply again as London traders arrived at their desks, as it became clear that no party had won a majority.

Another currency strategist in London, Viraj Patel, said that the pound’s nightmare scenario would always be the failure to have a safe political stability and the result of a hung parliament.

“Hopes that political uncertainty would decrease substantially under a more stable Conservative government…(have) been all but dashed,” said Patel.

“With the two-year Article 50 clock ticking, the passage of time is sterling-negative,” he added, referring to the formal Article 50 process by which Britain is set to leave the EU. “A working government is needed as soon as possible to avoid a further drop in the pound.”

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Euro Rallies Amid Political Worries over Several European Countries

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The European currency surged back after weakening against the dollar earlier amid political worries over Greece, Italy and Britain as European geopolitical fears weakened risk appetite.

EUR/USD was up 0.20% to $1.1186 by 10:29 ET, after falling as low as 1.1108.

The single currency came under pressure in early trade as worries over Greece’s bailout, the prospect of an early Italian general election and European Central Bank President Mario Draghi’s comments about the need for continued stimulus all weighed.

James Woods, a global investment analyst in Sydney, attributed most of the currency’s decline on Tuesday, saying Athens may opt out of its next bailout payment if creditors cannot get a debt relief deal done.

“The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Woods said.

However, he warned against reading “too much into it” without more details or confirmation, adding it was doubtful Greece would forgo the bailout payment at this stage.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to intend to do both at their June meeting.

Comments by former Italian Prime Minister Matteo Renzi on Sunday in favor of holding an election at the same time as Germany’s in September also raised uncertainty and pulled the euro lower earlier.

So did a statement by European Central Bank President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

Meanwhile, sterling pushed higher, rising 0.3% to $1.2877, despite British Prime Minister Theresa May’s lead over the opposition Labor Party dropped to as low as 5-6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans,  which adds to political risk around Brexit as well.

Recent polls have indicated that Prime Minister Theresa May’s Conservative Party has less of a lead over the Labor Party than expected.

The pound was also higher against the euro, with EUR/GBP down 0.09% at 0.8703.

Moreover, the greenback index was at 97.23, off the day’s highs of 97.67 as the firmer euro weighed up.

Last week the index plumbed lows of 96.79, its weakest level since November 9 amid uncertainties over the Trump administration.

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Commodity Currencies Inch Higher As Oil Slumps

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Currencies linked to commodity or oil-linked currencies such as the Canadian dollar, New Zealand dollar, Russian ruble and the Norwegian krone inched higher as oil prices slumped.

The Canadian dollar was last trading up 0.20% at C$1.3460 per U.S. dollar, down from a five-week high of C$1.3388 touched on Thursday. New Zealand dollar surged back 0.30% to $0.7045 after slipping 0.34% earlier. The Russian ruble and the Norwegian krone rose 0.51% and 0.17% to $0.01766 and $0.1193 respectively.

Oil Prices Slumped

Battered oil prices slumped on Friday after tumbling 5% in the previous session.

On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to extend a deal to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018, disappointing investors who are betting on longer or larger edges.

Brent crude futures were down from their last close 1.01% to $50.94 per barrel at 8:06 AM EDT as they were still set to end Friday with a weekly loss of more than 3 percent. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures were below $50, at $48.43, slipped 47 cents and 0.96% from their last close.

Matt Simpson, a senior market analyst, wrote in a Friday note, “Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations (for) extended cuts. As the extensions were estimated to be around nine to twelve months, OPEC needed to far exceed this time horizon for oil to sustain its rally.”

Moreover, the dollar index lost 0.12% to 97.08, some risk-off sentiment driving the yen higher, who rose to a 3-day high against the greenback 0.76% to 111.03 yen, while the euro also edged higher 0.13% to $1.1225.

Meanwhile, Sterling fell over half a percent to as low as $1.2870, a two-week low on Friday, pulling further away from a May 18 peak of $1.3048, its strongest level since September last year, after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition prior to elections next month.

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Pound Sags After Deadly Manchester Explosion

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Sterling slipped on Tuesday after a suspected suicide attack killed at least 22 people and wounded 59 at a pop concert in the English city of Manchester.

Sterling eased 0.1 percent to $1.298, extending Monday’s 0.3 percent loss. The pound dropped 0.3 percent to 144.34 yen, after losing 0.2 percent on Monday.

The attack came up just two-and-a-half weeks before an election that Prime Minister Theresa May is expected to win easily, though polls showing that the contest was tightening put the sterling under pressure.

At least 22 people were murdered in a suicide bombing at a pop concert by U.S. singer Ariana Grande along with children in the northern English city of Manchester. Fifty-nine (59) others were injured in the attack carried out by a suicide bomber, who died after detonating an improvised explosive device.

If the attack on the concert is confirmed as a terrorist attack, this would be the worst and deadliest attack in Britain by militants since four British Muslims killed 52 people in suicide bombings on London’s transport system in July 2005.

“This has been the most horrific incident we have had to face in Greater Manchester and one that we all hoped we would never see.” said Hopkins. “We have been treating this as a terrorist incident and we believe, at this stage, the attack last night was conducted by one man. The priority is to establish whether he was acting alone or as part of a network.”

Euro At Six-Month High

The euro hit a six-month high overnight after German Chancellor Angela Merkel said it was “too weak” due to the ECB’s monetary policy, pointing out that this helped explain Germany’s relatively high trade surplus.

The common currency jumped 0.1 percent to $1.1249 after jumping as much as 0.5 percent and closing 0.3 percent higher on Monday.

Junichi Ishikawa, a senior FX strategist in Tokyo, said that Merkel’s comments boosted the euro and so the weakened dollar is not essentially a bad thing for Trump.

The chancellor’s comments delivered fresh momentum to the euro, which has been on a bullish footing since the French presidential elections earlier this month. Upbeat euro zone data and a widening spread between the 10-year German and U.S. government bond yields have also supported the currency.

Moreover, The safe-haven yen advanced against major peers like the dollar and euro but its gains were modest.

The dollar was barely down 0.09 percent at 111.14 yen after a dip to 110.860 but the euro rallied 0.03 percent to 125.12 yen.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, was 0.1 percent lower at 96.80.

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