The US dollar was the biggest loser on Tuesday as US housing data proved to be very disappointing. The Commerce Department reported that housing starts plunged by 12.8 percent during the month of April, and a whopping 54.2 percent from a year earlier, to a record low annual pace of 458,000. Likewise, new building permits slumped 3.3 percent in April, and 50.2 percent from a year earlier, to 494,000.
The main event risk for the US dollar on Wednesday will be the release of the minutes from the Federal Reserve’s last meeting on April 29. Following that meeting, the markets saw no surprises from the Federal Open Market Committee (FOMC), as they left the fed funds target range at 0.0 percent - 0.25 percent and said that “conditions are likely to warrant exceptionally low levels…for an extended period.” Furthermore, the FOMC reiterated measures first announced in March, when they said they would still purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year, as well as $300 billion of Treasury securities by autumn. However, there were tinges of optimism within the policy statement as the FOMC qualified their initial, repeated remark that data indicates that the economic contraction has continued by adding that “the pace of contraction appears to be somewhat slower.”
Since this information has already been revealed, the release of the minutes may not be very market-moving. The one thing that may capture the market’s attention, though, is the FOMC’s long-run projections for growth, unemployment, and inflation as revisions that indicate that the outlook appears to be even worse than previously anticipated could hurt risk appetite throughout the financial markets, and thus lift safe-haven currencies like the US dollar. However, if the revisions improve, FX carry trades could surge and punish the greenback.[B]
**For a full list of upcoming event risk and past releases, go to [/B][B]www.dailyfx.com/calendar[/B]
Check out the Daily Fundamentals in its entirety for a look at what happened throughout the FX markets today.[/B]