US Dollar Strengthens Ahead of Fed Meeting, Data Release
The US dollar rose against its major trading partners early Wednesday, except for a small pullback against the yen, as markets prepare for the Federal Open Market Committee’s statement at 2:00 pm ET and Federal Reserve Chairman Jerome Powell’s press conference.
The CME FedWatch tool shows a 97% chance that the FOMC will leave the target for the federal funds rate at the current 5.25% to 5.50% range and a 3% chance of a 25 basis point rate increase to 5.50% to 5.75%.
With the rate outcome widely expected, the focus will be on any changes to the statement and forward-looking comments from Powell that hint at the path of policy ahead. There will be no update to the Summary of Economic Projections at this meeting.
Wednesday’s schedule will be brisk even before the FOMC meeting, starting with ADP’s private payrolls count for October followed by the Treasury’s quarterly refunding announcement.
The S&P Global final manufacturing reading for October is due to be released with the Institute for Supply Management’s reading shortly after at 10:00 am ET, the same time as construction spending data and job openings data for September. Weekly energy stocks round out the data.
Earlier Wednesday, the Mortgage Bankers Association said mortgage applications continued to decline in the week ended Oct. 27 despite a small drop in 30-year fixed mortgage rates.
A quick summary of foreign exchange activity heading into Wednesday showed that USDEUR fell to 1.0552 from 1.0575 at the Tuesday US close and 1.0664 at the same time Tuesday morning. Meanwhile, the next European Central Bank meeting is scheduled for Dec. 14.
Also, GBPUSD declined to 1.2141 from 1.2151 at the Tuesday US close and 1.2191 at the same time Tuesday morning.
In the UK, home prices rose solidly in October but were still down sharply year-over-year, while the UK’s manufacturing purchasing managers’ index rose slightly in October to still indicate contraction in the sector, data released earlier Wednesday showed.
The next Bank of England meeting is set for Thursday, where no change in the policy rate is expected. USDJPY declined slightly to 151.1089 from 151.7091 at the Tuesday US close, as Japanese officials have suggested that an intervention is possible, and the Bank of Japan purchased bonds.
The pair is still well above a 150.6852 level at the same time Tuesday morning. Japanese manufacturing PMI improved slightly in October but remained below the breakeven point, data released overnight showed. The next BoJ meeting is scheduled for Dec. 18-19.
USDCAD rose to 1.3881 from 1.3875 at the Tuesday US close and 1.3828 at the same time Tuesday morning. Canada’s manufacturing PMI is scheduled to be released today followed by an appearance by Bank of Canada Governor Tiff Macklem at 4:15 pm ET. The next BoC meeting is set for Dec. 6. Nigeria’s Top 5 Railway Projects Gulp $26 Billion –Report