Forex Market Review – Dollar strengthens after US retail sales and ahead of Fed meeting

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The dollar surged against the Japanese yen after U.S. retail sales data rose 1.1 percent to hit a five-month high. The February figure beat expectations of a 1.0 percent increase and was higher than January’s 0.4 percent rise.

Also behind the dollar’s strength on Tuesday, is the expectation that the FOMC (U.S. Federal Open Market Committee) at a policy meeting later today, will give an upbeat economic assessment of the U.S. economy.  Such a view would underline growing expectations that the Federal Reserve  will unlikely pursue  further monetary stimulus, which usually weakens a currency.

USDJPY surged to a fresh eleven-month high of 82.84, the highest level since April 17. Earlier in the day the dollar fell against the rising yen after the Bank of Japan unanimously decided to kept its monetary policy unchanged.

EURUSD opened the European trading session at 1.3161 and declined to a low of 1.3055. Despite a stronger-than-expected increase in the March ZEW indicator of German investor expectations, the euro was unable to gain ground against a broadly stronger US dollar. The sentiment index jumped to its highest level since June 2010.

Sterling attempted to move higher against the dollar. Trade data from the U.K. that showed the goods trade deficit widened by less than expected in January, offered little help. In the wake of the report, GBPUSD tried to consolidate its earlier gains but after hitting a high of 1.5672, the pair fell to 1.5621, weighed by a stronger dollar after the US retails sales data.

USDCHF jumped to a high of 0.9239 from a session low of 0.9148.

The ICE Dollar Index, which measures the U.S. dollar against a basket of currencies, rose to 80.037 from 79.840.

Gold prices denominated in USD fell from a session high of $1,702.40 down to $1,683.84.

The focus turns to the FOMC statement, which is scheduled to be released at about 18:15 GMT  today after its meeting on interest rates.