Dollar weakens broadly after FOMC minutes: July 10, 2014

Market Review - 09/07/2014 22:44GMT 

Dollar weakens broadly after FOMC minutes

Despite dollar's initial rebound after the release of slightly hawkish FOMC minutes, the greenback fell broadly as the statement failed to give an insight the pace of interest-rate increases forecast for next year. 

The minutes of the Fed's previous FOMC meeting stated ' officials generally agree dual use of interest on excess reserves, reverse repo facility in normalizing policy; participants backed maintaining wide spread, perhaps 20 bps, between ioer n reverse repo rates; FOMC may end bond buying program following October meeting if certain economic conditions remain positive; most participants see continuing role for Fed funds rate; many back continuing a target range; participants examined ways to change calculation of Fed funds effective rate in interest rate hike cycle; many participants want to end portfolio reinvestments at or after first rate rise; Fed staff continues to forecast inflation remaining below 2% objective over next few years; some participants concerned that persistent low inflation in Europe n Japan cud erode inflation expectations.' 

Although the single currency traded sideways in Asia and briefly rose to 1.3631 at European open, price pared its gains and retreated to 1.3602 ahead of New York open. However, euro found renewed buying and rebounded to 1.3643 in New York morning. Later, price fell briefly to 1.3611 after the release of FOMC minutes before rising to an intra-day high at 1.3648 on dollar's broad-based weakness. 

Versus the Japanese yen, despite initial retreat to session low at 101.45 at Asian open, the greenback pared its losses and rose to 101.72 in European morning. Dollar continued to trade with a firm bias and rose briefly to session high at 101.85 following the release of FOMC minutes before dropping to 101.53. 

The British pound tracked euro's initial intra-day movements n rebounded to 1.7146 at European open before falling to an intra-day low at 1.7094 at New York open, weighed down by the release of weaker-than-expected UK Halifax house prices. Later, cable pared its losses and recovered to 1.7144 in New York morning before retreating briefly to 1.7107 in NY afternoon. However, price pared its losses and rose to session high at 1.7161 in NY afternoon on dollar's weakness post the release of FOMC minutes. 

UK Halifax house prices m/m came in at -0.6% vs forecast of 0.2%. 

In other news, ECB President Mario Draghi said 'governing council determined to keep monetary policy accommodative for an extended period; council united in commitment to using unconventional instruments if needed; essential to enforce EU fiscal rules; calls for common European governance over structural reforms.' 

Data to be released on Thursday: 

New Zealand PMI, Japan domestic CGPI, machinery orders, consumer confidence, Australia employment, China exports, imports, trade balance, France CPI, industrial output, Italy industrial output, UK RICS housing survey, trade balance, BoE rate decision, Canada housing price index, U.S. jobless claims, wholesale sales and wholesale inventories.

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