Dollar steady ahead of FOMC meeting
Currency markets are refusing to buy into the Ukraine talks or a more dovish FOMC story, with the US dollar maintaining its recent gains versus the majors and continuing to grind higher versus key Asian currencies. The dollar index was almost unchanged at 99.01 overnight, although it traded in a choppy 40 point range, easing only slightly to 98.89 in Asia today. 98.50 and 99.50 appear to be the key levels for now.
EUR/USD tested 1.1000 overnight but retreated to 1.0950 as Russian statements appeared to pour cold water on the progress with talks. EUR/USD has edged higher to 1.0965 in Asia with 1.1020 resistance, while multi-year support remains at 1.0800. The single currency remains at the mercy of Ukraine headlines and how hawkish, or not, the FOMC is this evening. GBP/USD is mid-range at 1.3050 today, having traced out a double bottom at 1.3000 with resistance at 1.3100. A hawkish FOMC tonight will put the pressure on the Bank of England to follow suit tomorrow with a 0.25% hike. AUD/USD and NZD/USD remain at the bottom of their ranges despite risk sentiment improving. Both remain vulnerable now that commodity prices have also eased. USD/JPY is consolidating above 118.00, and a hawkish FOMC this evening likely sees the rally towards 120.00 resuming.
The PBOC set a neutral USD/CNY fix today after a few weaker ones signalling its displeasure at further CNY appreciation. USD/CNY is trading at 6.3600, and USD/CNH at 6.3800 today, with nerves around China’s growth being offset by news that Saudi Arabia is looking to accept oil payments in yuan. That has capped gains in USD/CNY and USD/CNH for now.
Notably, the KRW, THB, NTD and PHP have only made modest gains versus the US dollar in the last 24 hours, and all remain near recent lows versus the greenback. The fall in energy prices has provided no respite and with inflationary pressures to remain elevated, China’s growth fears swirling, and the PBOC signalling a weaker yuan, regional Asian currencies will remain under pressure.
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Jeffrey Halley
He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.
A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.
He was born in New Zealand and holds an MBA from the Cass Business School.
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