FOREX-Dollar treads water as traders stare at event risk

The U.S. dollar trod water against a basket of major currencies on Wednesday, as FX markets braced for a host of events, including central bank meetings in the United States and Europe, the UK general election and a key deadline for U.S.-China trade talks.

The dollar index, which measures the greenback against six other major currencies, was up 0.02% at 97.433. The U.S. Federal Reserve, which has lowered borrowing costs three times this year in response to the global trade war, is expected to leave policy unchanged when it concludes its last policy meeting of the year later on Wednesday.

"The Fed is poised to hold rates steady but the combination of the statement, forecast update, and Powell’s press conference may put a dovish spin on the outlook, whilst stressing that rates and the economy are in a good spot," Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said in a note. Data on Wednesday showed U.S. consumer prices increased solidly in November, which together with labor market strength could support the Federal Reserve's intention not to cut interest rates again in the near term.

The euro was about flat on the day against the greenback ahead of new European Central Bank boss Christine Lagarde's first policy meeting on Thursday, where investors will scrutinize her every word for a sense of the direction she the bank will take under her leadership. Traders are also watching for news on the U.S. China trade talks. U.S. President Donald Trump has until Dec. 15 to decide whether to impose tariffs on nearly $160 billion in Chinese consumer goods just weeks before Christmas, a move that could be unwelcome in both the United States and China.

Elsewhere, Sweden's crown jumped to a more than 4-month high against the dollar after strong inflation data made it highly likely the country would end negative interest rates. The dollar was 0.58% lower against the Swedish crown. In another notable move, the Hong Kong dollar rallied to its strongest level since July 24, which analysts attributed to the unwinding of bets previously profiting from "carry trades" - borrowing with low-interest rates in Hong Kong to purchase U.S. dollar assets.

The greenback was 0.16% lower against the Hong Kong dollar. . Hong Kong's currency is pegged to the greenback at a tight range of 7.75-7.85 per dollar and the city's monetary policy moves lock-step with the United States. The pound inched higher in very thin trading, shrugging off a key opinion poll for Britain's general election that showed the ruling Conservative Party might still fail to win a majority.

 

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