The dollar made steady gains in European session but fell back in late trading as markets await tomorrow’s FOMC statement by the Fed, which kicks off its two-day policy meeting today. The greenback was trading 0.5% higher against the yen at 123.60, having touched a low of 123.07. Investors are hoping that Wednesday’s FOMC statement will provide more precise clues on when the Fed will raise rates, which is widely expected in September, though December also remains a strong possibility.
Markit’s flash services PMI had little impact on the dollar. Services PMI rose to 55.2 in July from 54.8 in June. This was slightly above estimates of 55.0. But the Conference Board Consumer Confidence index disappointed as it came below forecast of 100.0 at 90.9 in July.
The euro gave up most of Monday’s gains when it had advanced on the back of strong German IFO business climate data as investors turn their attention on US rate rise expectations. The single currency dropped to 1.1045 against the dollar by late European session. It fell even more sharply against the pound and was down by 0.6% to 0.7085.
The pound was boosted today by good GDP numbers as initial estimates of first quarter growth showed the UK economy expanded by 0.7% from the previous quarter. The year-on-year rate was 2.6%. The figure was in-line with economists’ forecasts and an improvement on the first quarter’s 0.4% growth. The pick-up in UK growth and job market has proved more robust than anticipated by the Bank of England, which in recent weeks has strongly signalled that the timing of an interest rate rise has move forward. Most analysts now expect the Bank of England to hike rates in January 2016. Cable, which spiked higher after the GDP data, was trading just below 1.56 in late European session.
European equities turned positive on Tuesday after five straight sessions of losses as markets in China were calmer today following an 8% slump on Monday. Authorities in China pledged to take additional measures to boost liquidity and prop up share prices. But concerns over China’s economy continued to weigh on oil prices, which hit a 6-month low. Brent crude prices were down 0.5% to $52.94 in late European trading.
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