Dollar rebounds broadly as upbeat U.S. data and FOMC announcement on Wednesday trigger short covering: July 26, 2017

Market Review - 25/07/2017   22:33GMT  

Dollar rebounds broadly as upbeat U.S. data and FOMC announcement on Wednesday trigger short covering

Although the greenback dropped against majority of its peers on Tuesday as political concerns continued to weigh on the currency ahead of Wednesday's Federal Reserve rate decision, the pair pared its losses in New York trading and rebounded on the back of upbeat U.S. consumer confidence data. 

The Conference Board, a market research group, said its index of consumer confidence jumped to 121.1 this month from a reading of 117.3 in June, whose figure was revised down from a previously reported 118.9. Analysts expected the index to fall to 116.5 in July. 

Versus the Japanese yen, although dollar dropped to session low at 110.83 at European open, price pared its losses and rallied to 111.64 in New York morning on active cross-selling of yen together with greenback's strength on the back of U.S. consumer confidence data as well as rising U.S. Treasury yields. Price later climbed to session highs of 111.32 near the close. 

The single currency traded with a firm bias in Asia and gained to 1.1669 at European open, then rallied to a fresh 23-month peak at 1.1712 in New York morning, just short of 2015 high made in August at 1.1715, helped by release of upbeat German Ifo data. However, the pair swiftly pared its gains after the release of U.S. data and retreated to 1.1657 in New York before stabilising, price later edged lower to 1.1643 ahead of New York close. 

The Munich-based Ifo institute said its business climate index rose to 116.0 this month from 115.1 in June. Economists had expected a reading of 114.9. 

Although the British pound dropped to session low at 1.3008 in European morning, price rallied in tandem with euro to an intra-day high at 1.3084 at New York open. However, cable pared its gains and retreated on broad-based usd's rebound to 1.3025 in New York afternoon on dollar's strength post the release of upbeat U.S. data. 

In other news, Ifo economist said 'euro fx rate is no impediment to German economy; business going well enough to offset euro fx rate; German companies are experienced in managing fx moves; not worried about impact of Brexit on German economy; nothing appears to knock German economy off course at the moment.' 

Data to be released on Wednesday: 

New Zealand trade balance, exports, imports, Australia CPI, France consumer confidence, Italy consumer confidence, business confidence, U.K. mortgage approvals, GDP, inflation report hearings, and U.S. mortgage applications, new home sales, Fed monetary policy statement, Fed interest rate decision.