US Dollar Consolidates as Markets Price In 25bp Fed Rate Cut This Week
The US dollar consolidated last week’s gains ahead of the rate decision on Wednesday, with market participants turning slightly bearish as they began to price in a 25bp rate by the Fed. As a result, the US dollar fell against the Australian and New Zealand dollar, with the Canadian dollar following behind as commodity prices inched higher. Against the European currencies, the greenback tallied up mild losses against both the Euro and British pound as the pairs held above 1.56 and 1.99, respectively. The low yielding Swiss franc came out as the only currency to trail against the US dollar, while a rise in Japanese retail sales helped the yen to stave off downside pressures.
Increased volatility shook the stock markets with bearish sentiment dragged down the markets as they retraced early morning gains. As a result, the DJIA fell 20.11 points to 12,871.75, with tech giant IBM taking the biggest loss. Among the broader indices, the S&P500 shaved 1.47 points to hold off at 1,396.37 points amid 151 stocks hitting a new 52 week high.
US Treasuries kicked off the week on a brighter note as they retraced last week’s losses, with treasury demands accelerating as risk adverse investors moved into the safe haven of risk free bonds. As a result, the benchmark 10-Year yield dropped to 3.831 percent from 3.870, while the 2-Year yield plunged to 2.350 percent from 2.393 percent.
Looking ahead, the S&P/CaseShiller Home Price Index will kick off the morning at 13:00 GMT, and will be followed by the Consumer Confidence index at 14:00GMT. For Wednesday, first quarter GDP data will be lead our focus for the morning, while our attention will be switch to the FOMC rate decision at 18:15 GMT.