US dollar traders were cautious about pushing the currency higher ahead of the Federal Reserve announcement later today. The dollar was hurt yesterday by weaker-than-expected durable goods orders data for September, which cast a shadow on just how strong the US economy was and whether business investment would increase thereby creating the conditions for more sustainable economic growth. Consumer confidence on the other hand rose to a 7-year high, showing that consumers are benefitting from a strong labor market and lower gasoline prices.
The euro traded as high as 1.2764 the previous day before receding to around 1.2740 today, taking advantage of the dollar’s weakness to rise to a 1-week high. The dollar was a little more resilient against the Japanese yen, trading above 108 as risk sentiment was very positive following the previous day’s trading on Wall Street. The S&P 500 rose within 1.5% of its all-time high registered in September on the back of strong earnings. The yen was however supported by a higher-than-expected industrial production number out of Japan for September.
The Swedish crown stabilized during Asian trading, after sliding to a 4-year low against the dollar after the Riksbank reduced the country’s key rate to zero and said it would keep the rate low until 2016 in order to fight deflation.
In an otherwise slow day for economic releases, traders will be expecting the verdict out of the Federal Reserve later today. The Fed is widely expected to announce the end of its Quantitative Easing program, but it will probably balance this with a reference that it will keep interest rates low for a “considerable period”. Overall the market seems to have been positioned for a Fed that will not be in a hurry to raise interest rates and will sound a note of cautious optimism about the US economy. Tomorrow’s third quarter growth rate out of the United States should help to clarify the picture of how strong the economy actually is.