The U.S. dollar showed mixed performance ahead of the New York session on Wednesday, paring its Asian session gains against the European majors while holding some ground against the yen as the recent run of risk-sentiment faded on renewed fears over more monetary tightening in China and fears of a revenge attack by Al Qaeda terrorists.
Stabilizing prices and managing inflation expectations are critical and banks’ required reserve requirements have no absolute ceiling, the People’s Bank of China said in its quarterly monetary policy report published on Tuesday. The renewed rate hike concerns sent Asian equities broadly lower today with Shanghai composite down more than 2.4 percent.
Portugal became the third eurozone country seeking sovereign rescue package after Ireland and Greece. Portugal’s caretaker government announced a deal with the European Union and the International Monetary Fund (IMF) on a three-year bailout package worth 78 billion euros ($115 billion) for resolving the EU member-nation’s financial problems.
The market focus for the day is likely to rest on the ADP’s private sector employment report to be released at 8:15 am ET. The report, which is considered precursor to Friday’s national employment report, is expected to show that private payrolls expanded by 200,000 in April.
The results of the Institute for Supply Management’s service sector survey are also likely to influence market sentiment. The report is due at 10 am ET. The non-manufacturing index is expected to ease slightly to 57 in April from 57.3 in March.
The dollar retreated from its Asian session highs against the euro, slipping back below 1.4880. The greenback thus eased more than 0.8 percent from Tuesday’s 6-day high of 1.4756.
The dollar that halted after breaking below the 1.6500 level in the aftermath of yesterday’s U.K. PMI shocker staged a rebound to hit a 1-week high of 1.6455 in the Asian session. However, the greenback failed to sustain the gains later and shed more than 0.5 percent.
Market players keenly await Thursday’s Bank of England and European Central Bank decisions, with both central banks expecting to keep rates on hold at 0.50 percent and 1.25 percent respectively.
Meanwhile, rating agency Standard & Poor’s said today that a rate hike from the Bank of England is “almost certain” within the next three months as “we think inflation is likely to take off once again, to peak around 5 percent in the third quarter”.
The research firm noted that recent trends in mortgage approvals signaling that the UK housing market is slowly weakening. The S&P comments came after another weak house lending report from the BOE this morning.
The seasonally adjusted Markit/Chartered Institute of Purchasing & Supply purchasing managers’ index for the construction sector also fell short of expectations, slipping to 53.3 in April from 56.4 in March. Economists had forecast only a modest fall to 55.9.
Eurozone retail sales declined 1 percent month-over-month in March, data published by the Eurostat showed today. That follows February’s 0.3 percent rise. Economists had expected a mere 0.1 drop for March. Annually, retail trade dipped 1.7 percent in March, reversing prior month’s 1.3 percent growth.
The dollar that broke past the 0.86 level against the Swiss franc yesterday for the first time in record, lacked a clear direction today except some early buying in the Asian session. The dollar-franc pair traded in a range between 0.8650 and 0.8605.
The dollar was mostly higher against the Japanese yen, hitting as high as 81.20 but failed to make any significant headway to breach its 10-day SMA at 81.55.
The greenback was unable to challenge its Asian session’s 5-day high of 0.9551 against the Canadian dollar in the succeeding trading hours. The dollar-loonie pair traded in a broader-range of 0.9550 and 0.9520.
The loonie came under pressure as the price of crude oil eased below $111 today as traders await cues from today’s official report on weekly U.S. crude oil inventories.