Dollar index was steady on the day at 84.241

Good Morning,

- Asian shares cautiously edged higher on Tuesday as investors awaited a FED meeting beginning later in the session.

- The dollar index was steady on the day at 84.241, but not far from its 14-month peak of 84.519 scaled a week ago.

- While the global recovery continues at a moderate rate, the outlook is uneven across regions. Growth will be strong enough to push unemployment down further in the United States, the United Kingdom and Canada. In Japan, where unemployment has already declined to low levels, the economy will grow broadly in line with its potential. China is expected to continue an orderly adjustment to still high but more sustainable growth rates. Growth in India is projected to pick up and Brazil will experience a modest rebound from recession.

- UK Consumer Price Index (CPI) inflation fell back well below the official target in July after having suddenly spiked a month before. A continuation of the subdued inflation rate should allow the Bank of England (BoE) to remain relaxed about keeping monetary policy ultra-loose without stoking upwards price pressures as a stronger sterling and slack in the labor market help keep prices in check. In August, market consensus suggests the rate should fall further to 1.5%, which would be well below the official 2% target.

- Industrial production in the U.S. unexpectedly declined in August for the first time in seven months as automobile making cooled. Output at factories, mines and utilities fell 0.1 percent after a 0.2 percent gain the prior month that was smaller than previously reported, figures from the Federal Reserve showed on Monday. The median forecast in a Bloomberg survey of 79 economists called for a 0.3 percent rise.

- Deutsche Bank on EUR/USD: There is certainly a serious danger of a ‘buy the rumor sell the (USD) fact’ response. As we look at the price action in recent weeks, the big FX moves have evolved from a EUR led move, to a USD led move, and the USD has tended to pick up the most momentum against currencies where positions have been there to be squeezed. The Aussie is one great example. However, particularly on the EUR there are some clear signs of lost momentum. The immediate USD follow-through after the FOMC meeting is then likely to be disappointing, even if the Fed delivers as per our expectations. As for the multi-week context, the change in the considerable time language fits perfectly with the USD bull mantra: “Time is on the USD’s side”. Look at the forward curves: the 2 year US – German yield is spread is expected to widen progressively in favor of the USD every year for the next 4 years, which represents a shift in carry in favor of the USD that is most remarkable for its extraordinary persistence."

- The last holdout to the U.S. dollar’s world-beating rally is crumbling, and the derivatives market signals there’s no relief on the way anytime soon. Australia’s dollar slid below 90 U.S. cents yesterday for the first time since March as evidence of a slowdown in China and a weak domestic economy boosts the chances the South Pacific nation will hold interest rates at a record low. The U.S., meanwhile, is moving closer to raising borrowing costs. While the Aussie is the only Group of 10 currency to advance against the greenback this year, its gain has eroded to 1.2 percent from 6.5 percent at the start of July.

- Foreign direct investment into China, a gauge of external confidence, slumped to a four-year low amid widening antitrust probes into multinational companies. Inbound investment was $7.2 billion in August, down 14 percent from a year earlier, the Ministry of Commerce said today in Beijing after a 17 percent drop in July. It was the first back-to-back decline of more than 10 percent since 2009.

Have a nice Day !