Wednesday, 23 Jun 2010

Dollar Weakens Prior to Fed Funds Release

The euro was higher following the lunch break in the European trading session. Boosting the European currency was positive economic data from the euro zone. The pound was also stronger after the Bank of England released its meeting minutes which showed dissention concerning Britain's interest rate policy. Traders will now be anticipating the release of the Fed Funds rate at 18:15 GMT today.

Dollar weakness was prevalent this mooring as the EUR/USD was trading up at 1.2280, after an opening day price of 1.2262. The GBP/USD is higher at 1.4935, following an opening day price of 1.4819. The USD/JPY was lower at 90.20, from 90.92

Boosting the currencies against the dollar was positive economic data from the euro zone. Both the German Flash PMI along with the German Manufacturing PMI were stronger than expected. This created a positive environment in the forex markets and had traders selling the dollar.

This afternoon the Fed Funds rate is expected to be released along with the accompanying rate statement. The Fed is expected to hold interest rates steady, but the statement may show a cut in U.S. growth forecasts due to recent weak U.S. housing data and the European sovereign debt crisis. A cut in the growth rate or a change to the wording in the rate statement may cause the dollar to weaken further in the major pairs. The next resistance line for the EUR/USD is 1.2380.