The Dollar rose to an almost one-month high versus the Euro on Tuesday, buoyed by growing views the Federal Reserve is ready to signal a pause in its interest rate cutting-campaign and by weak European economic data. Analysts expect the FOMC to cut the benchmark lending rate by 25bp to 2% and indicate a pause for now, after an aggressive exercise that has cut rates by 300bp since mid-September. While markets are expecting a slightly hawkish tone in the FOMC’s statement accompanying the rate decision, poor economic data from the euro zone raised doubts on the ECB’s ability too maintain its tough stance on inflation and interest rates. The Sterling was hurt by a warning from policy-maker David Blanchflower that Britain faced a real risk of recession unless the Bank of England took “aggressive” action.
News and Events:
The Dollar rose to an almost one-month high versus the Euro on Tuesday, buoyed by growing views the Federal Reserve is ready to signal a pause in its interest rate cutting-campaign and by weak European economic data. Analysts expect the FOMC to cut the benchmark lending rate by 25bp to 2% and indicate a pause for now, after an aggressive exercise that has cut rates by 300bp since mid-September.
EurUsd dropped 0.47% to 1.5576 having touched 1.5541 intraday low. UsdJpy was 0.25% lower to 103.92 after posting 103.22 low. UsdChf rose 0.21% to 1.0364. GbpUsd dropped 1.17% to 1.9679. EurJpy dropped to a session low of 161.11 and was last trading at 161.81 down 0.74%. EurGbp also hit a four-week low against the pound at 0.7830, but later rallied to 79.17, up 0.71%.
While markets are expecting a slightly hawkish tone in the FOMC’s statement accompanying the rate decision, poor economic data from the euro zone raised doubts on the ECB’s ability too maintain its tough stance on inflation and interest rates. Data on Tuesday showed French consumer confidence fell to its lowest level since 1987 and German inflation in April undershot forecasts, with the annual rate slowing sharply, piling pressure on the Euro.
The Sterling was hurt by a warning from policy-maker David Blanchflower that Britain faced a real risk of recession unless the Bank of England took “aggressive” action. Analysts said the Euro’s slide could be arrested if euro zone inflation data due on Wednesday does not show a moderation as widely expected by the market. Expectations for a Fed pause were a bit overstated, which could hurt the Dollar, they said. Data on Tuesday showed US consumer confidence plunged to a five-year low in April. Gross domestic product data on Wednesday may show the economy shrank in the first quarter and Friday’s jobs report is expected to show payrolls fell 80,000 in April.
Today’s Key Issues (time in GMT):
08:00 NOK March Credit indicator 13.9% vs 14.2%
08:00 NOK February Labour force survey 2.4% vs 2.3%
08:00 NOK March Retail Sales -0.4% vs 1.7%
09:00 EUR April Euro-zone Business climate 0.7 vs 0.8
09:00 EUR April Euro-zone Consumer Sentiment -13 vs -12
09:00 EUR April Euro-zone Economic Sentiment 99 vs 99.6
09:00 EUR March Euro-zone Unemployment 7.1% vs 7.1%
09:00 CHF April KOF Indicator 1.48 vs 1.54
12:15 USD April ADP National Employment -60k vs -8k
12:30 USD Q1 Core PCE prices 2.1% vs 2.5%
12:30 USD Q1 GDP Advance 0.2% vs 0.6%
12:30 CAD February GDP 0.2% vs 0.6% (MoM)
13:45 USD April Chicago Purchasing Managers 47.5 vs 48.2
18:15 USD FOMC rate decision 2% vs 2.25%
00:00 JPY Bank of Japan rate decision 0.5% vs 0.5%
The Risk Today:
EurUsd: Euro is heading lower near 1.5511 support far away from 1.6019 all time high done last week. Medium term trading range is still set between 1.5500 � 1.5800. Strong support hold 1.5528 (23.6% retracement of 1.4311-1.5904 advance). Psychological 1.5000 level marks strong key support before 1.4500 pivot point. Pivot point hold 1.6000 resistance ahead of key resistance 1.6200 market target. Initial support hold 1.5511 April 3rd low.
GbpUsd: Cable broke out of recent consolidation around 1.9800 and hit yesterday 1.9668 low. Further pressure below 1.9800 may open the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Renewed strength may reopen the way toward 2.0000 psychological level. Actual trading range is 1.9600 � 2.0000.
UsdJpy: Uptrend started mid-March is loosing strength. But further advance may open the way up to 105, then 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Fail to overtop 105 will bring back weakness on 100 � 103 consolidation trading range. Minor support holds 102.95 early April high.
UsdChf: Market broke up 1.0200 last week and further Dollar advance may bring market up to 1.0457 trendline resistance. A return below 1.0200 may reopen the way down 1.0000 and toward 0.9639 17th March low. Current uptrend looks set up over 1.0200 former resistance. Early January double top 1.1191 marks strong resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland