The Federal Reserve is expected to keep its benchmark Interest Rate unchanged near zero today, as traders get ready for a busy news cycle. Investors will focus on the interest rate outlook, but many analysts say the Fed is unlikely to change the wording of its pledge to keep rates low for an extended period. This may have the result of stabilizing USD trading, or potentially driving the world's primary currency to new extremes. Will the USD experience a reversal from yesterday's bullishness?
Economic News
USD - Dollar Advances vs. EUR ahead of Fed Statement
The U.S. Dollar clung to small gains versus the EUR Tuesday, but pared earlier gains as traders waded through mixed signals on the health of the economy and the Federal Reserve started its 2 day policy meeting.
The Dollar climbed to a 1-month high against the EUR as concerns about the global banking sector reignited safe-haven demand for the greenback. The Dollar climbed against its major rivals as investors retreated from risk assets on jitters over banks and braced for central bank meetings in the United States, the Euro-Zone and the UK.
Traders remained wary ahead of this week's heavy news cycle; the U.S. Federal Reserve started its 2 day policy meeting on Tuesday and the European Central Bank (ECB) and the Bank of England (BOE) will also hold policy meetings later in the week.
The overwhelming consensus is that the Fed will hold the federal funds rate steady at near-zero, where the Fed's target has been since last December. Investors will be paying close attention, however, to the wording of the Fed's statement for any clue as to when the central bank would begin pushing Interest Rates higher. Once American markets open for the day, traders should expect a lot of volatility.
EUR - Sterling Falls Sharply on UK Banking Sector Concerns
The EUR reversed its gains against the U.S. Dollar and the Yen Tuesday, when concerns over the banking sector boosted the greenback, which tends to gain when investors shed risk assets.
The 16-nation currency traded at $1.4760, from $1.4775 yesterday in New York, after rising to $1.4811 earlier. It was also at 132.95 yen, from 133.32 yesterday after strengthening to 133.98 earlier. Sentiment on the financial sector in Europe was weak and that pressured the EUR and the Pound earlier and contributed to the recent strength of the U.S dollar, analysts have said.
The Sterling tumbled to a 1-week low against the U.S. Dollar after the UK Treasury announced a shake-up of British banks, which raised concerns about the financial sector.
