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Dollar Drops Ahead Of Fed's Meeting, Euro Little Change After Euro Sentiment Data Print E-mail
Daily Forex Fundamentals | Written by ICN.com | Apr 29 13 11:10 GMT

Dollar Drops Ahead Of Fed's Meeting, Euro Little Change After Euro Sentiment Data

The euro firmed on Monday as investors welcomed the formation of a new coalition government which ended almost nine weeks of political gridlock while a successful Italian bond sale boosted the common currency.

The Italian government has sold 3 billion euros of ten-year bonds auction at an average yield of 3.94 percent, while it sold another 3 billion euros of 5-year bonds at an average yield of 2.84%, the lowest since October 2010, as a new government in Italy helped eased uncertainty and boost risk twarards Italian debt instead.

The common currency gained after Enrico Letta and his coalition were sworn in at the presidential palace in Rome on Sunday while the new government may be installed as soon as today, wrapping up two months of political impasse.

The euro was little changed against the dollar after data showed economic confidence in the euro area decreased more than forecasts in April as the bloc struggled to emerge from recession.

Consumer sentiment dropped to 88.6 from a revised 90.1 in April, the lowest since December while Business confidence dropped more than expected.

The single currency rose against dollar on Monday; EURUSD is currently trading around 1.3081, falling from a high of 1.3099 to touch a low of 1.3031. The trading range for this week is among the key support at 1.2905 and key resistance at 1.3275.

Investors will focus on ECB rate decision after IMF said the bank still has room to cut the rate below the current level if needed. European Central Bank Executive Board member Joerg Asmussen said an interest rate cut by the ECB would not be effective to euro-area periphery nations.

In contrast, the U.S. dollar weakened on Monday ahead of the Federal Reserve's two-day meeting due tomorrow, investors will closely watch fed's meeting as they look for clues on its $85 billion of bond-buying a month.

The GDP figure released on Friday followed a wave of downbeat reports from the U.S. economy. Investor's main focus will be on the awaited non-farm payrolls next week as it is the major determinant of the Fed's monetary stance.

Economists do not expect much change in Fed policy, but will keep close watch on the meeting for clues over the next period, and the future of the Fed's stimulus program, especially after that GDP growth in the first quarter fell short of forecasts, coming in at 2.5% versus the consensus forecast of 3.3%.

The U.S. dollar dropped against a basket of major currencies as indicated by the dollar index which fell to 82.24, compared with the session's opening of 82.48. USDIX has so far recorded an intraday high of 82.51 and a low of 82.19.

 

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