Forexpros – The dollar traded higher against most major global currencies on Wednesday amid growing talk that the Fed will make no major announcement at a monetary policy meeting later Wednesday regarding any need for stimulus.
In Asian trading on Wednesday, EUR/USD was down 0.15% at 1.2286.
The European Central Bank will also meet to address monetary policy this week, with expectations for some sort of intervention there as well.
Months of weaker-than-expected economic indicators in the U.S., ranging from a 1.5% second-quarter GDP growth rate to a slew of dismal monthly jobs reports, have fueled talk the Fed will roll out a new round of bond purchases from banks, a monetary stimulus tool known as quantitative easing that weakens the dollar to spur recovery and hiring.
The Fed wraps up a monetary policy meeting later Wednesday, though talk began to grow in Asian trading Wednesday that the Fed will only to extend its forecast as to how long conditions may stick around to merit low borrowing costs, a far softer policy response than outright easing.
The Fed can wait until a September meeting to decide if the economy merits serious intervention.
Quantitative easing weakens the dollar amid an ensuring surge in liquidity.
The European Central Bank is also holding a monetary policy meeting this week, yet doubts the ECB will take drastic actions to spur the economy kept investors focusing more on the dollar.
Many investors remain wary if the ECB will announce Federal Reserve-style quantitative easing measures as once hoped, opting instead for a round of sovereign bond purchases made with money already circulating in the European economy.
Under quantitative easing, the Fed expands its balance sheet to buy assets, often described as printing money out of thin air, which packs more of a punch.
The European Central Bank’s mandate requires it to keep a tighter lid on inflation, which makes the call for quantitative easing harder to make, while the Federal Reserve has more wiggle room to spur recovery since it adheres to a dual mandate of price stability and to foster optimal employment conditions.
In the U.S., data released earlier revealed an economy limping along its road to recovery.
The Chicago purchasing managers’ index rose to 53.7 in July from 52.9 in June, beating out expectations for a decline to 52.4.
In addition, the Conference Board said that its index of U.S. consumer confidence rose to 65.9 in July, from 62.7 in the preceding month, beating expectations for a 61.5 reading.
Nevertheless, U.S. personal spending came rose 0.2% in June in line with expectations but unchanged from May, while personal income rose 0.5%, slightly beating out expectations for a 0.4% increase.
Some holdouts sold greenbacks on sentiment the Fed will hint at action later Wednesday, keeping trading choppy, especially against the yen, a safe-haven currency.
The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.09% at 1.5664.
The dollar was down against the yen, with USD/JPY trading down 0.18% at 77.98, and up against the Swiss franc, with USD/CHF trading up 0.12% at 0.9775.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.01% at 1.0031, AUD/USD down 0.27% at 1.0477 and NZD/USD up 0.11% at 0.8097.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.06% at 82.78.
All eyes in the U.S. will remain on the Federal Reserve later today ahead of its statement on monetary policy.
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