Forex Review – Dollar eases ahead of Fed meeting

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EURUSD opened the U.S. trading session on Monday at 1.3107 and steadily edged up to a high of 1.3155. With no North American economic data today, investors focused on tomorrow’s FOMC meeting and deterred from buying the dollar. This led the greenback lower to give back some gains made earlier today in reaction to news that China posted a huge $31.5 billion February trade deficit.

The ICE dollar index which measures the USD against a basket of six currencies, fell to 79.869 versus 79.985 from late Friday.

Sterling traded weaker against the dollar and euro today. EURGBP rallied from lows of 0.8350 to highs of 0.8416. Sterling began its decline early in the day against the dollar on risk aversion after the Chinese trade data. By the New York session, GBPUSD fell to a new six-week low of 1.5601, the lowest level since January 25.

USDCHF eased off a three-week high 0.9217 hit in Asian trading and fell to 0.9161in the North American session as bets were off the dollar, in preparation for the Fed meeting and US Retail Sales releases tomorrow (Tuesday). Investors are being cautious in the event that the Fed proves more dovish than expected, then dollar will suffer  against the Swiss franc.

The same holds true for the USDJPY, which resulted in the pair trading a range between 82.10 and 82.35.

The Canadian dollar took direction from commodity prices today to a large degree, mostly due to lack of domestic and US data. Weaker crude oil prices due to the disappointing Chinese trade data, weighed on the commodity-price sensitive Canadian dollar. Canada is a major oil exporter, and weaker growth in China, which is the worlds’ second largest oil consumer, took a toll on oil prices today. Crude for April’s contract fell to as low as US$105.37 a barrel during New York trading hours, versus Friday’s high of US$108.18. USDCAD rose to a North American session high of 0.9945, moving up from a Friday low of 0.9871.

Spot gold prices dipped on Monday below the key $1,700 level as a result of China posting its largest trade deficit in over 20 years. China is the world’s second largest economy and a top commodities consumer.