The dollar held steady against most major rivals, although it fell further against the pound after the minutes from the Bank of England's meeting earlier this month revealed that one policymaker favored an interest rate hike.
Overall, market sentiment has been cautious this week on concerns about the health of the global economy. Renewed worries about the condition of the eurozone banking sector, combined with disappointing U.S. existing-home sales in May, helped to stall a recent rally in riskier assets such as stocks and commodities.
The Federal Reserve's interest rate announcement this afternoon is also helping to keep many market participants sidelined. The Federal Open Market Committee, the central bank's rate-setting team, is expected to keep U.S. borrowing costs unchanged near zero to support the recovery. Investors also expect the FOMC to renew its pledge to keep rates ultralow for quite a while, given continued weakness in the housing sector and a high jobless rate just below 10%. Investors are also bracing for the report at 10 a.m. EDT today on U.S. new-home sales in May. Expectations are that sales plunged.
The Canadian dollar fell to a one-week low against the greenback, dragged down by generally weak investor sentiment and by remarks yesterday by a Bank of Canada official who cast some doubt on the timing of the next hike in local lending rates. BOC deputy governor Timothy Lane said that a strong loonie could be a key consideration in setting monetary policy in the months ahead. The Canadian central bank next meets on July 20. A report on Canadian retail sales is due out this morning.
EUR: The euro neared a one-week low against the greenback as a backdrop of depressed risk sentiment and renewed worries about the health of banks in the eurozone kept pressure on the single currency.
Earlier this week, Fitch Ratings downgraded one of the bloc's biggest banks, citing a decline in the quantity of its assets as a result of the debt crisis that is hurting states like Greece and Spain.
The euro continues to see its direction dictated by headlines on the bloc's sovereign debt crisis. Europe's common currency was little changed by generally mixed data Wednesday. Germany's Gfk index, a forward-looking survey of consumer sentiment, unexpectedly held steady at 3.5 in July compared to expectations for a decline to 3.3.
The eurozone composite PMI survey, which takes into account both the manufacturing and services sectors, fell as expected to 56.0 in June from 56.4 the previous month. The euro earlier this week had touched its highest level in a month against the dollar. Nevertheless, the single currency is expected to remain vulnerable going forward given persistent concerns about the region's sovereign debt crisis, which poses significant risks to the bloc's banking sector.
