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Daily U.S. Forex Summary

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All focus will remain on the Fed statement release at 11:15

Thu, Jun 25 2009, 05:33 GMT
by Union Bank of California Team

Union Bank of California

The US dollar is lower this morning in a thin trading session ahead of this morning’s Fed meeting. While any move on interest rates is unlikely, markets are waiting for the Fed’s statement to see if the threat of inflation will be addressed. Even a glowing durable goods orders number, couldn’t shake the downward pressure on the USD.
U.S. durable goods orders unexpectedly rose 1.8% in May, which is the highest month on month gain in 5 years, providing further evidence that the battered economy was finding its feet.
All focus will remain on the Fed statement release at 11:15.

The euro continues to be the grand benefactor of the dollars weakness, strengthening yet another percent against the USD in overnight trading. The euro is also stronger against the CHF and GBP today following the SNB’s possible intervention.

The British pound, which had risen broadly in the past month on views the UK economy could emerge quickly from its worst recession in decades, continues to hold strong against the USD as the dollar struggles ahead of the Fed statement.
Traders also await testimony from Bank of England Governor Mervyn King to the UK Treasury Committee to see if he would refer to recent signs that the UK economic downturn may be leveling off.
Later in the day, the Fed is widely expected to quell recent speculation of a possible rise in interest rates this year, which analysts say may sting the dollar and benefit the pound.
BoE chief economist Spencer Dale said it was too soon to judge the effectiveness of the central bank's program to buy a target of 125 billion pounds in UK assets to help boost the economy, but that early signs were positive.

We are seeing an extremely narrow trading range on the Japanese yen, which is slightly weaker this morning against its U.S. counterpart.

Following trading sentiment this morning the Canadian dollar has been largely sidelined, as is waits the Fed news. If the Fed beats back any possibility of higher interest rates later in the year, the CAD will continue to firm and has room to strengthen on the back of rising commodity prices.

The Australian dollar which is recovering from yesterday’s three-week lows, held fast as investors, waited on the sidelines ahead for the outcome to a U.S. central bank policy meeting.
Traders said they were wary of waging big bets on the currency for now because investors are undecided about whether recent weakness in markets was just a pull-back in an uptrend, or the start of a more protracted sell-off.
Some analysts argue that the Aussie had run ahead of global demand and commodity prices and was overdue for a pullback.

A report showing New Zealand consumer sentiment rebounded to an 18-month high in the second quarter had little market impact, but offered hope that the economy might finally be on the road to recovery after a long-standing recession. The data also underpinned expectations that the central bank will look to end its easing cycle. Earlier this month the RBNZ kept rates on hold after an aggressive string of cuts, but reiterated an earlier pledge to keep them at the current record low 2.5 percent or lower through to late 2010.
This data had little impact on the New Zealand dollar as markets pause as they wait for news from the Fed.
Investors will look towards New Zealand’s current account on Thursday and Q1 on Friday for further direction into the kiwi.

Published on  Thu, Jun 25 2009, 05:38 GMT