Forex Market Update: U.S. Dollar Broadly Lower as the Market Anticipates No Change in Fed’s Policy

The euro climbed to a two-month high against a broadly weaker U.S. dollar on Wednesday as expectations are abound that the Federal Reserve will keep its aggressive monetary policy unchanged in an effort to provide more stimulus to the economy.

At around 8:30 a.m. EST, the euro jumped 0.56% $1.3241.

Meanwhile the ICE dollar index, a gauge on U.S. unit’s performance against a basket of six major traded currencies, hit as low as 81.495, which is its lowest level since late February, according to Reuters.

The U.S. dollar also fell to a two and half month low against the pound sterling following the release of less-than-feared UK’s April PMI data.

The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) climbed to 49.8 in April from an upwardly revised 48.6 in March. A reading more than 50 signifies economic expansion. Economists’ consensus estimate was for a reading of 48.5.

At last check, the sterling gained 0.32% to $1.5582.

Speaking to Reuters, Philip Shaw, an economist at Investec said, “It’s a relatively decent result… The manufacturing sector is still weak – the PMI remains below the 50 breakeven level – but there is some semblance of stabilization, which could imply a gentle building of recovery momentum across the economy.”

Meanwhile the entire spotlight will remain on the Fed’s policy rate statement on Wednesday, which is scheduled to be announced at 2:15 EST.

The European Central Bank is expected to announce its monetary policy on Thursday. Speculation is rife that the ECB will slash its prime lending rate by 25 basis points to 0.50%.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.