Dollar falls broadly after cautious Fed minutes: May 25, 2017

Market Review - 24/05/2017  22:22GMT  

Dollar falls broadly after cautious Fed minutes

Although the greenback gained against majority of its peers on Wednesday in Europe and N.American morning session as investors speculated that the Federal Reserve's May meeting minutes would hint at a rate hike in June, release of cautious Fed minutes which showed 2 more rate hikes this year from the Fed may not be a done deal sent dollar falling broadly in later New York trade. 

The minutes of the latest Federal Reserve meeting showed policymakers agreed they should hold off on raising interest rates until they see evidence that a recent economic slowdown was transitory. 

Versus the Japanese yen, dollar traded with a firm bias in Asia and gained to 112.05 in early European morning before retreating to 111.70 in European morning. However, the greenback found renewed support there and climbed to session high of 112.13 near New York midday but later tumbled to 111.48 after release of Fed minutes due to broad-based weakness in the greenback..

Although the single currency remained under pressure in Asia following decline from previous trading day and weakened to 1.1171 in early European morning, price pared its losses and staged a rebound to 1.1205 in New York morning due partly to cross-buying of euro especially vs sterling. Euro later weakened to session lows of 1.1169 near New York midday and later rallied to 1.1220 after release of Fed minutes. 

The British pound swung wildly in hectic trading on Wednesday. Price traded with a firm bias in Asia and recovered to an intra-day high at 1.2999 in European morning, however, cable swiftly pared its gains and tumbled to session low at 1.2927 near New York midday and later rebounded on short covering to 1.2977 after release of Fed minutes. 

In other news, ECB's Constancio said 'see no broad risk in euro area housing mkt; macroprudential tools are needed to mitigate stability concerns; expect an increase in bank profitability this year; share concerns expressed in ECB minutes, statements; must be cautious about premature withdrawal of stimulus; preferable to err on the side of removing stimulus too late than too early; output n employment gaps justify caution; fully aware that economy improving.' 

On the data front, research group Gfk said that its index of Germany's consumer climate rose to 10.4, from 10.2 in the preceding month. Analysts had expected Gfk consumer climate to remain unchanged at 10.2 last month. 

Data to be released on Thursday: 

Italy industrial sales, industrial orders, UK mortgage approvals, GDP, U.S. jobless claims, trade balance and wholesale inventories.