(MENAFN– ecpulse)
The US dollar held higher against major currencies in European trading Wednesday as investors cautiously anticipate the FOMC July meeting minutes, looking for new signals whether the fed will taper its stimulus as soon as September.
Investors are jittery ahead of the FOMC minutes due for release today at 14:00 EST stocks resumed losses in Europe and US futures are pointing lower despite slight relief seen in the session on Tuesday.
The dollar is holding back ground after losses versus the euro and sterling since the kick-start of trading this week; tapering signals by the Fed should be dollar-positive and that triggered risk aversion today after gains seen in the market.
The dollar index (USDIX) is trading higher at 81.12 near the intraday high set at 81.16 and off lows set at 80.92.
Markets are in search for more clarity and guidance from the Fed, especially with recent stance favoring gradual stimulus exit as the Fed worry of the growing size of the Fed balance sheet. The Fed tied their low rate to unemployment below 6.5% and inflation below 2.5%.
Inflation pressures remain subdued amid seen spare capacity in the economy and the jobs market improvement remains moderate. We cannot call the jobs growth robust yet or the economic conditions as the recovery stretches at a moderate pace with some worrisome signals again reappearing!
The bets on a signal for exit as soon as September is likely the key to the market movement today that should be watched. A lack of guidance for tapering $85 billion of monthly bond purchases will surely reverse the market bets and in turn push stocks higher and the dollar lower again, as even with slight exit rhetoric investors are focused on an early exit. This will be the negative-dollar scenario, while confirmation of exit as soon as next month or clear guidance for the steps will on the contrary extend the dollar gains for today.
The EURUSD is trading lower for now versus the dollar in very cautious trades as investors assess whether the euro will be able to resume the current upside wave, especially with stability seen above 1.3315.
The EURUSD set the early high at 1.3427 and declined to set the low of 1.3380. The volatility will extend today with eyes on the pivot 1.3315 as stability above it will still favor the extension of the current wave.
GBPUSD on the other end continues to trade with high volatility, but still higher versus the dollar trading near the high set at 1.5659. Sterling gained on data showing CBI factory orders surge in August to 25 from 15 offsetting the reported first public deficit since 2010.
The outlook for the UK economy has improved recently and data is generally beating expectations recently supporting sterling hold onto gains.
USDJPY is trading with a slight upside bias as well around 97.48 after setting the high of 97.67 earlier today and off lows at 97.12. The trading range remains tight for the yen ahead of the FOMC minutes which will surely have the impact on the market.
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