Dollar Weakens as Markets Focus on Fed Meeting
On Tuesday, the dollar declined against the basket of six other major currencies. Investors keep a close eye on the start of the Federal Reserve’s policy meeting for two days, which will begin later in the session.
The dollar remained flat after an unexpected and disappointing report on United States home sales which made investors to cut back expectations for a rate hike before the year ends. United States new home sales plunged 11.5 percent last month from 529,000 to 468,000 in August. Analysts had anticipated new home sales to plummet 0.4 percent to 550,000 in September.
The Federal Reserve was broadly expected to keep interest rates on hold until early 2016. However, investors are still waiting for the banks rate statement for latest signals on the timing of raising interest rates.
The greenback was weaker against the yen, with USD/JPY slumped 0.53 percent to 120.44, breaking Monday’s two-month gains of 121.47. The dollar’s losses were held in check as the emerging monetary policy stance between the Federal Reserve and other central banks strengthened by dollar.
As for the EUR/USD, it was moderately changed at 1.1050 as emerging monetary expectations proceed to weigh on the single currency.
Most investors expect the European Central Banka and the Bank of Japan to widen their boosting programs to strengthen economy growth. The Bank of Japan will hold its next policy meeting on Friday.
The United States dollar index, which gauges the greenback’s strength against other major currencies, tumbled 0.06 percent to 96.86, not very far from Friday’s two-month gains of 97.30.
Since the EUR/USD stood still 1.1050, views on the single currency remained weak after European Central Bank President Mario Draghi indicated that further monetary plunging will probably proceed later this year.
The greenback was also steady against the Swiss franc and the pound. It stands with USD/CHF at 0.9841, while GBP/USD is at 1.5345.
The New Zealand and Australian dollars were moderately changed, as NZD/USD stood at 0.6785, while AUD/USD stood at 0.7247. As for the Canadian dollar, it climbed being at USD/CAD 0.29 percent and to trade at 1.3192.
Sterling slumped after the United Kingdom Office for National Statistics reported gross domestic product gained 0.5 percent in the third quarter, below expectations for a 0.6 percent growth. The United Kingdom’s economy rose 0.7 percent in three months from June.
The United Kingdom year over year economic growth surged 2.3 percent in the third quarter, missing the forecasted 2.4 percent. On the other hand, the United Kingdom’s economy gained at an annualized rate of 2.4 percent in the second quarter.
Euro Zone Lending Declines to Near Zero in September
The European Central Bank reported on Tuesday the growth in lending to euro zone corporations plunged almost to hold in September while a wider gauge of money circulating in the euro zone was unchanged.
Lending growth to non-financial firms slowed to an annualized 0.1 percent in September from 0.4 percent the previous month. As for lending growth to households, it moderately gained 1.1 percent in September from 1.1 percent in August. Sparse lending to companies has resolved the struggling euro zone economy.
Last week, the European Central Bank raise the prospect of giving more monetary spurs to the euro zone economy to strengthen inflation and growth, probably as soon as December. The M3 measure of money circulating in the euro zone, which is usually an early indicator of future economic activity, hiked by 4.9 in September, unchanged from August and below forecasts for 5.0 percent.
US Durable Goods Data
The United States Commerce Department released a report showing that the total durable goods orders reduced by 1.2 percent last month. Orders for durable goods in August were changed to a slump of 3.0 percent from a previously reported drop of 2.3 percent.
Core durable goods orders, excluding volatile transportation items, declined 0.4 percent in September, against the expectations of a 0.1 percent climb. Other than that, core durable goods also tumbled 0.9 percent in August.
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