Following an uninspiring start to the week, the dollar regathered its strength on Tuesday and closed higher against most major rivals. Although risk flows dominated the markets and the benchmark 10-year US Treasury bond yield remained steady above 1.5%, the greenback managed to find demand as the Fed policy meeting went underway. The European economic docket will feature the euro area September Unemployment Rate. October ADP Employment Change and ISM Services PMI from the US will be looked upon for fresh impetus before the Fed announces the Interest Rate Decision and releases the Monetary Policy Statement at 1800 GMT. FOMC Chairman Jerome Powell will deliver his remarks on policy decisions at 1830.
The Fed is widely expected to announce a reduction of $15 billion in monthly asset purchases while keeping the policy rate unchanged. Investors will keep a close eye on the Fed’s language regarding the rate outlook and inflation expectations.
Market mood: All three major equity indexes in the US hit new record highs on Tuesday. During the Asian session, the data from China revealed that the business activity in the service sector expanded at a stronger pace than expected in October with the Caixin Services PMI improving to 53.8, vs 50.7 expected. Nevertheless, the market mood seems to have turned cautious ahead of the European session. As of writing, the Shanghai Composite and the Nikkei 225 indexes were down 0.6% and 0.45%, respectively. Meanwhile, US stock index futures are down between 0.1% and 0.15%.
EUR/USD failed to hold above 1.1600 following Monday’s rebound and seems to have gone into a consolidation phase around 1.1580. Data releases from the euro area are unlikely to trigger a sharp reaction in the pair.
GBP/USD extended its slide on Tuesday and fell to its lowest level in two weeks at 1.3605, pressured by the broad USD strength and the lack of progress in Brexit talks. Ahead of Thursday’s Bank of England (BoE) meeting, the dollar’s valuation is likely to drive the pair’s action.
After posting large losses on Tuesday, NZD/USD regained its traction in the Asian session and moved into the positive territory above 0.7100. The data from New Zealand showed that the Unemployment Rate declined to 3.4% in the third quarter from 4%. This reading came in much better than analysts’ estimate of 3.9%. Additionally, the Employment Change was up 2% in the same period, compared to the market consensus of 0.4%.
Gold is having a difficult time attracting investors on Wednesday. Currently, XAU/USD is down 0.5% at $1,780. Sellers could move to the sidelines and allow the pair to find support in the second half of the day.
Cryptocurrencies: Bitcoin gained nearly 4% on Tuesday and seems to have gone into a consolidation phase around $63,000, where the upper limit of the two-week-old trading channel is located. Ethereum hit a new all-time high near $4,600 on Wednesday.