RTTN: Dollar Down Ahead Of FOMC Statement, ADP Employment Data Disappoints
The US dollar weakened broadly on Wednesday ahead of this week's key risk events, starting with the Federal Open Market Committee policy statement later in the global day.
Disappointing ADP employment also pressured the dollar, with the U.S. private sector adding just 119,000 jobs in April compared to last month's revised figure of 131,000. Economists had expected employment to increase by about 155,000 jobs compared to the addition of 158,000 jobs originally reported for the previous month.
The FOMC is scheduled to release its post-meeting policy statement at 2:00 pm ET following the conclusion of its 2-day monetary policy meeting.
With markets pricing in no change in the Fed's monetary policy stance, the central bank is widely expected to continue with its bond purchase program as long as it is warranted.
The European Central Bank rate decision on Thursday and the U.S. non farm payrolls on Friday will also be closely watched by market participants across the globe for further directional cues.
The ECB is widely expected to cut its benchmark interest rate by 0.25 percent to a new record low of 0.5 percent on Thursday. The U.S. unemployment rate is forecast to remain unchanged at 7.6 percent in April.
Elsewhere, the slump in the U.K. manufacturing activity eased at more-than-expected in April on a renewed expansion in new orders, suggesting that growth would gather momentum in the second quarter after the economy averted a triple-dip recession at the beginning of the year.
The seasonally adjusted purchasing managers' index for the manufacturing sector rose to 49.8 in April from March's revised reading of 48.6, a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics (CIPS) showed today.
Economists had forecast the index to rise to 48.5 from the previous month's originally reported reading of 48.3. A figure below 50 suggests contraction in the sector, while one above the mark indicates growth.
House prices in the U.K. slid a seasonally adjusted 0.1 percent in April after staying flat in the previous month, results of a survey by the Nationwide Building Society revealed today. Prices were forecast to rise 0.3 percent.
Chinese manufacturing activity expanded at a slower rate in April as new orders and production growth eased, underpinning concerns that the recovery at the world's second largest economy still remained fragile.
The purchasing managers' index that measures the performance of the manufacturing sector, fell to 50.6 in April from 50.9 in March, a survey by China Federation of Logistics and Purchasing, or CFLP, and the National Bureau of Statistics revealed today. Economists expected a slightly higher reading of 50.7.
The US dollar fell back to below the key 1.32 level against the euro after a gap of two-and-half months, falling as low as 1.3234 around 8:15 am ET. The next downside support for the dollar is visible around the 1.33 area.
The greenback slipped to 0.9254 against the Swiss franc around this time, its weakest level since April 17. If the pair extends downtrend, 0.9225 is seen as the next probable support level.
Against the pound, the US currency dropped to 1.5591 by 8:15 am ET, setting the local unit to its weakest level since February 13. The next likely bearish barrier for the buck is visible around the 1.5680 area.
The dollar also slipped to 97.09 against the yen around 8:17 am ET, down by more than 0.3 percent from Asian session high of 97.68. If the dollar weakens further, it may re-test early Asian session's low of 97.05.
Looking ahead, the Institute for Supply Management will release the results of its manufacturing survey at 10 am ET. The consensus expectations call for a small decline in the index to 51 in April.
Around the same time, the Commerce Department is due to release its construction spending report for March. Economists expect a 0.6 percent increase in spending following a 1.2 percent increase in February.
