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Dollar Paring Early Gains Ahead Of Midterm Elections


The dollar got off to a positive start this morning, but has pared its gains over the course of the session. Traders are in a cautious mood ahead of tomorrow's midterm elections, the results of which will determine which party controls the House and Senate.

Investors are also looking forward to Thursday's monetary policy announcement from the Federal Reserve. The Fed is widely expected to leave interest rates unchanged, but traders will keep a close eye on the accompanying statement for clues about an expected rate hike in December.

Reflecting a slight cooling off after a record month in September, the Institute for Supply Management released a report on Monday showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of October.

The ISM said its non-manufacturing index dipped to 60.3 in October after climbing to 61.6 in September, although a reading above 50 still indicates growth in the service sector. Economists had expected the index to drop to 59.3.

The dollar rose to an early high of $1.1354 against the Euro Monday, but has since retreated to around $1.1415.

Eurozone's investor sentiment eroded for a third consecutive month in November to its lowest level in two years, survey data from Sentix showed on Monday. The Sentix investor confidence indicator dropped to 8.8 from 11.4 in October. The latest reading, which matched economists' expectations, was the lowest since October 2016.

The buck reached a high of $1.2964 against the pound sterling Monday morning, but has since pulled back to around $1.3050.

The UK service sector registered its slowest rate of expansion in seven months in October, survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed Monday. The services Purchasing Managers' Index dropped more-than-expected to 52.2 in October from 53.9 in September. The expected level was 53.4.

Members of the Bank of Japan's Monetary Policy Board said that the country's economy was continuing its modest expansion at a satisfactory rate, minutes from the central bank's meeting on September 18 and 19 revealed on Monday.

Domestic demand is expected to continue on an upward trend, the minutes added, while annual inflation is predicted to maintain its gradual climb to the target of 2 percent.

"Although it would take time to achieve the 2 percent price stability target, it was appropriate to persistently continue with the powerful monetary easing under the current guideline for market operations as the momentum toward achieving 2 percent inflation was being maintained," the minutes said.

The greenback rose to a high of Y113.340 against the Japanese Yen Monday, but has since eased back to around Y113.235.

The services sector in Japan continued to expand in October, and at a faster rate, the latest survey from Nikkei revealed on Monday with a PMI score of 52.4. That's up from 50.2 in September, and it moves back above the boom-or-bust line of 50 that separates expansion from contraction.

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