Markets are steadier overall on the day and are now shifting their focus on the Federal Reserve which concludes a two-day meeting today with a policy announcement followed by a press conference with Chair Janet Yellen.
There are no expectations of a rate hike at this FOMC meeting. The Fed raised its key overnight lending rate in December for the first time in nearly a decade to the current range of 0.25% to 0.50%. All eyes will be on the press conference to see if Janet Yellen will signal if the US central bank still plans to raise rates twice in 2016, as was previously indicated earlier this year.
After yesterday’s risk-off mood in the markets, most major currency pairs today are calmer as focus has shifted away from Brexit concerns for now and investors look to the FOMC meeting later.
There was a move out of safe havens like the yen and gold and there was a bounce in the euro and the pound which had fallen yesterday. Gold fell to as low as $1,278 an ounce before steadying around $1,282.
Sterling gained as UK data showed an unexpected acceleration in wage growth and an overall upbeat jobs report.
The number of people unemployed in the UK fell by 20,000 to 1.67 million in the three months to April, the lowest since the three months to May 2008. The drop in the number of jobseekers pushed Britain’s unemployment rate to 5.0% in the three months to April – the lowest since August to October 2005. Expectations were for the unemployment rate to stay unchanged at 5.1%.
The dollar slipped after data showed US factory production fell more than forecast in May. Industrial output declined 0.4% month-on-month from a revised 0.2% advance in April.
The greenback dropped below the key 106 yen handle after the US data to reach 105.79. Earlier in the day the dollar/yen reached a high of 106.38.
Meanwhile, the yen faces an important risk event on Thursday when the Bank of Japan announces its policy decision. There are some expectations for further easing in order to stimulate the sluggish Japanese economy.
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