Dollar ends lower ahead of Fed rate decision

Market Review - 17/09/2019   23:58GMT  

Dollar ends lower ahead of Fed rate decision

The greenback pared initial gains made in Asia and Europe and ended the day lower against its peers on Tuesday due partly to falling U.S. yields together with caution ahead of the Federal Reserve rate decision, where it is widely expected the central bank will cut its rate.   
  
Versus the Japanese yen, although price briefly dropped to session lows at 108.03 at Asian open, price rose to a 6-week peak at 108.36 on renewed US-China trade optimism. However, price then pared its gains and retreated to 108.06 in New York before moving sideways.  
Reuters reported China's vice finance minister will lead a delegation to visit the United States on Wednesday for trade talks, China's commerce ministry said on Tuesday.  The visit by Liao Min will pave the way for the China-U.S. high-level economic and trade consultations in October in Washington, it said. The talks are aimed at resolving a bitter trade war that has dragged on for over a year and hurt global growth.  Liao is also deputy director of the Office of the Central Commission for Financial and Economic Affairs.  
  
The single currency traded with a firm bias in Asia before briefly falling to session lows at 1.0991 at European open. However, price erased its losses and rose steadily to an intra-day high at 1.1074 near New York close on upbeat German investor confidence data.    
Reuters reported the mood among German investors improved more than expected in September, a survey showed on Tuesday, but the ZEW institute warned that the outlook for Europe's largest economy remained negative amid trade disputes and Brexit uncertainty.   ZEW said its monthly survey showed economic sentiment among investors rose to -22.5 from -44.1 in August. Economists polled by Reuters had expected a slight improvement to -37.0.   
  
The British pound remained under pressure in Asia and dropped to session lows at 1.2393 in European morning due partly to cross-selling of sterling especially vs euro. However, price erased its losses and rallied in tandem with euro to a near 2-month high at 1.2528 in New York due partly to comments from Irish Foreign Minister Coveney as well as usd's weakness.    
Reuters reported Ireland wants a deal on an orderly British exit from the European Union but Britain has so far failed to come up with a written plan, Irish foreign minister Simon Coveney said on Tuesday.  "We in the EU ... are open to a deal but it must achieve the aims of the backstop through a legally operable solution," Coveney told reporters.  "We await written proposals from the UK side. We simply haven't seen any written proposals to date."  

In other news, Reuters reported British Prime Minister Boris Johnson agreed with German Chancellor Angela Merkel on Tuesday to work with energy and determination to reach a Brexit agreement and will discuss it at a meeting of the United Nations next week, his spokesman said.    
After a bruising visit to Luxembourg on Monday when Johnson was booed by protesters and criticised by Prime Minister Xavier Bettel, the British leader spoke to Merkel earlier on Tuesday, redoubling efforts to secure a deal to leave the European Union.  
  
Data to be released on Wednesday:  
  
New Zealand current account, Japan exports, imports, trade balance, Italy industrial orders, industrial sales, UK core CPI, CPI, RPI, Core RPI, PPI input prices, PPI output prices, PPI core output, Italy trade balance, goods trade balance, EU construction output, HICP final, core HICP, U.S. MBA mortgage application, building permits, housing starts, Fed interest rate decision and Canada CPI, CPI BoC core, core CPI.