Dollar advances with all eyes on Fed
(Corrects data release day to Wednesday in paragraph 9)
By Chuck Mikolajczak
NEW YORK, July 27 (Reuters) - The dollar rose modestly against a basket of major currencies on Wednesday as investors braced for the latest policy announcement from the U.S. Federal Reserve in which the central bank is widely expected to hike interest rates by 75 basis points.
The greenback was weaker earlier in the session but had slowly gained ground to move into positive territory on the day.
Expectations for a 75 basis point rate hike stand at about 87% percent, according to Refinitiv data, with a roughly 13% chance for an even bigger 100 basis point hike. The central bank is expected to bring the rate up to as high as 3.4% by the end of the year as it attempts to bring inflation under control. IRPR
Comments from Fed Chair Jerome Powell will be closely monitored to gauge if the Fed will maintain an aggressive policy stance in the face of weakening economic data.
"There is sort of a mood shift going on out there with respect as to whether we will see that pivot or even hints of a dovish pivot here," said Karl Schamotta, chief market strategist at business payments company Corpay, in Toronto.
"At this point they have a danger of a self-reinforcing loop, if Powell hints that the Fed is poised to pivot at some point, that would drive long term interest rates lower, that would essentially take away from what they are trying to do with this front loaded rate cycle."
The dollar index =USD rose 0.168% at 107.310, with the euro EUR= down 0.05% to $1.0109.
Bets on oversized rate hikes helped push the dollar index =USD to a two-decade high earlier this month at 109.29, but the greenback has softened lately as economic data has hinted at a possible recession.
But on Wednesday, data showed the U.S. trade deficit narrowed sharply in June as exports jumped, while orders for non-defense capital goods excluding aircraft, seen as a proxy for business spending plans, rose 0.5% last month, potentially soothing some concerns about the economy.
The euro recouped some of the prior session's decline, which was the biggest one-day percentage drop for the currency in two weeks, but fears of a European recession remain high as Russia further slowed gas supplies to Europe through the Nord Stream 1 pipeline.
The gas crisis, along with political woes in Italy, will push the region into a mild recession by early next year and limit the European Central Bank's (ECB) path of interest rate hikes, analysts at JPMorgan said.
The Japanese yen JPY= weakened 0.16% versus the greenback at 137.16 per dollar, while Sterling GBP= was last trading at $1.2024, down 0.01% on the day.
In cryptocurrencies, bitcoin BTC= last rose 2.17% to $21,432.51.
World FX rates Link
Reporting by Chuck Mikolajczak; Editing by Angus MacSwan
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.