Forex Market Review – Euro buoyed by weaker USD ahead of Fed meeting

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Euro rose against a broadly weaker dollar ahead of a meeting of US Federal Reserve policy makers later today at 16:30 GMT. The Fed is expected to maintain ultra low interest rates for a longer period of time.  Meanwhile, earlier today, ECB President Draghi said in his testimony to an EU parliamentary committee that the ECB is confident the euro zone will eventually benefit from  the recent LTRO (long term refinancing operations).

 

EURUSD rose to a three-week high of 1.3235 from 1.3187.

EURJPY is up for a second day but was little changed in European trading, supported above 107.10.

 

Sterling fell sharply against most major counterparts after weaker than expected GDP data. First quarter GDP declined 0.2 percent from the end of 2011, versus expectations of a 0.1 percent expansion. Annual growth is now flat at 0 percent, placing the UK economy in a recession. GBPUSD tumbled after the data to a session low of 1.6080 from a seven month high of 1.6169. EURGBP rose to 0.8220 from 0.8170.

 

Elsewhere, the dollar was weaker against most counterparts as shown by the ICE dollar index, which tracks the performance of the greenback versus a basket of six other major currencies. The index was down 0.16 percent today at 79.20, the lowest since April 3. Weaker than expected US durable goods data further weighed on the dollar when they were released going into the US trading session.

 

Dollar fell against the Swiss franc, yen and Australian dollar. USDCHF fell to a three-week low of 0.9077, while USDJPY was down 0.3 percent on the day to 81.06. AUDUSD rose to 1.0344 from 1.0305.

 

USDCAD fell to the lowest level since March, reaching 0.9849, falling for a third consecutive day. This is due to the interest rate differentials between the two countries. The Ban of Canada is expected to raise rates, while the US Fed is expected to keep rates low for a longer period of time.