US Dollar Remains Steady In Anticipation Of FOMC Statement
The US dollar continues to strengthen against other currencies ahead of the end of the meeting of the Open Market Committee (FOMC) of the Fed. Growth of US bond yields also provides support for the American currency. Despite the correction of recent days, US bond yields continue to grow. Thus, the US 10-year bond yields was kept at the level of 2.976%.
Markets do not expect any changes in the monetary policy of the Federal reserve. Investors expect that the regulator will keep interest rate at the current level of 1.5-1.75%, and another rate increase to 1.75-2.00% should be expected at the next meeting in June. Since no changes in the policy of the Fed are expected, the most important for market participants will be the tone of the accompanying statement.
The euro stays soft. The single currency accelerated its fall last week, after ECB President Mario Draghi’s comments. The euro suffered further selling after French GDP data, which showed growth slowed to 0.3% qoq, missing expectation of 0.4% qoq. Today’s Q1 Eurozone GDP data, as well as tomorrow’s April CPI will become significant event for the currency.
The British pound is trading as the weakest one, weighed down by disappointing PMI manufacturing. The report saw investors slash expectations for a rate hike from the Bank of England at its upcoming meeting next week after overall economic growth slowed to near stagnation in the first quarter. Also UK Q1 GDP report showed only 0.1% qoq growth. UK will release construction PMI today.
The China Caixin PMI manufacturing rose to 52.5 in April, up from 51.0, above expectation of 50.9. New Zealand employment rose by 0.6% qoq in Q1, in line with forecast. Unemployment rate fell to 4.4%, below expectation of 4.5%. Labour force participation rate declined by 0.1% to 70.8%. Employment rate was unchanged at 67.7%.