What a day turned out to be Tuesday, after a relatively quiet start during the European session which saw most of the currencies stuck in tight ranges, apart from GBP/USD which was falling all day breaking important 2.0300 and finding a bottom at 2.0270. As the only important news from US was the FOMC meeting, the market was positioning all day for any surprises from Bernanke and his pals.
As we said before, the dollar was strong all across the board since Monday and even threatened to take out 1.40 at some point before giving up all its gains late last night. The FOMC minutes were once again not clear about the banks intentions, but the main message that was passed was that Bernanke and pals are not committing to any more cuts as initially was believed and they are waiting for more data to make final decisions. One thing that they said was that they were �worried �about the recent dollar weakness and what it can do to inflation and generally to the economy. That comment caught the market by surprise initially and the dollar got stronger all across the board in a knee jerk reaction. However, when traders digested the minutes, dollar started to fall again and EUR/USD broke 1.41, printing 1.4115 daily high.
It is so clear that the market players are still in a �hate the dollar mode�, as every chance they get they sell the greenback all across the board and trying hard to regain the recent high levels.
GBP/USD had a different story yesterday, as all day the pair was falling without stop and during the budget statement from UK chancellor Darling, who was very positive when it came to economy growth, the pair started to skyrocket, making 80 points in just a few minutes. What really killed the downtrend move in the pair, was Governor King which in a speech later in the evening , he basically told markets that BOE wont cut anytime soon and against all those who wanted the bank to start easing rates, he said that there were still inflationary risks to stability.
Today, we don�t have anything major coming out of the US, apart from the wholesale sales release later after the US open. It will be interesting to see the number, as a better than expected one, will give dollar bulls some kind of hope that with better data coming out form now on, maybe things are not as bleak for the American economy as everyone is making out to be. However, due to negative dollar sentiment any negative number might lead the pair easily to 1.42 level.
Lets not forget that on Friday, we have the PPI data out of the US, which again will be monitored closely by market participants and also the retail sales which are forecasted to be a bit higher than last month.
Basically, from now on, we need to see what the Fed wants to see: healthier economic data out of the US and return to stability in the housing sector which recently has taken a hit. If all that happens in dollars favor, we might see the dollar strengthening again and finally the so called �dollar weakness� to be decreasing�