The US dollar was little changed against a basket of world currencies Wednesday, as investors looked ahead to a policy announcement from the Federal Reserve later on in the day that could set the stage for a 2015 rate increase.
The dollar index, a trade-weighted average of the dollar against six world currencies, was up 0.1% to 96.83 in Wednesday’s early New York session. The index moved within a narrow range in the Asian and European markets after climbing 0.3% on Tuesday.
The dollar advanced against the euro, with the EUR/USD tumbling 0.2% or 20 pips to 1.1045. The pair is likely to see immediate support at 1.1030, the daily low. On the upside, initial resistance is likely found at the daily high of 1.1085.
In economic data, German consumer confidence was little changed, as optimism about personal finances outweighed concerns about the overall health of the economy. GfK’s forward-looking consumer confidence index for Germany held firm at 10.1 in August, matching expectations. However, the economic outlook of German consumers continued to lose significant ground, falling 6.5 points to 18.4. The economic indicator has lost nearly 20 points over the last two months.
In other trading, the US dollar lost ground against the British pound, which was supported by stronger than expected mortgage approvals. The GBP/USD advanced 0.3% or 48 pips to 1.5662. The pair is likely to face immediate resistance at 1.5670. On the downside, initial support is likely found at 1.5552.
UK mortgage approvals rose more than forecast in June, signaling continued momentum in the country’s housing market. Approvals climbed to 66,582 in June from an upwardly revised 64,826 the previous month, the Bank of England reported Wednesday. A median estimate of economists polled by Bloomberg called for 66,000.
The currency markets could see more price action later on in the day following the Federal Reserve’s rate announcement and accompanying press conference. The data-driven central bank is eyeing a 2015 rate hike, although the exact pace and timing is less clear.
While no change to the federal funds rate is expected Wednesday, the Fed is expected to set the stage for a possible rate hike in either September or October, pointing to a stronger labour market and overall economy. The Department of Commerce on Thursday is expected to show a sharp rebound in GDP growth in the second quarter after the economy contracted slightly in the first three months of the year.