The dollar is set to take its cues from the U.S. Federal Reserve’s policy statement and a speech by President Joe Biden on Wednesday, as it seeks to extend a recovery from an eight-week low touched earlier in the week against a basket of currencies.
The dollar index stood at 90.968, bouncing from Monday’s low of 90.679, its lowest level since March 3, though investors are not convinced if its downtrend since late March has ended.
The greenback’s decline stemmed largely from receding bets that the Federal Reserve could start laying the ground work for future policy tightening soon as the U.S. economy rapidly recovers.
On Wednesday, the U.S. central bank is widely expected to maintain its policy settings and Fed Chairman Jerome Powell is seen as likely to repeat his dovish message.
But some analysts say signs of rising inflation expectations could nudge the Fed to abandon its rhetoric that a policy tightening is still a long way off.
Investors’ inflation expectations, measured by break-even inflation (BEI) rate calculated from U.S. inflation-linked bonds, rose above 2.40% on Tuesday, the highest level since 2013.
The euro slipped 0.1% to $1.2080, off Monday’s two-month high of $1.2117.
Besides the Fed, investors are looking to President Biden’s first address to a joint session of Congress, also scheduled later on Wednesday.
Biden is expected to roll out a plan to raise taxes on the wealthiest Americans, including the largest-ever increase in levies on investment gains, to fund about $1 trillion in childcare.
News reports about his tax-hike plan dented markets’ risk appetite only briefly on Friday but analysts think there could be a bigger reaction if the plan becomes more concrete.
In crypto-assets, bitcoin extended its rebound from a trough hit on Sunday to $55,221.
Ether hit a record high of $2,711.6 in Asia on Wednesday.
China's yuan slips, but seen resilient on economic outlook
China's yuan softened slightly on Wednesday, in spite of firmer central bank guidance, as market participants awaited the outcome of the U.S. Federal Reserve's policy meeting.
The People's Bank of China set the midpoint rate at 6.4853 per dollar prior to market open, 71 pips firmer than the previous fix of 6.4924 and the strongest such guidance since March 12.
· U.S. 10-year yields continued to rise on Wednesday, touching their highest in nearly two weeks at 1.647%, adding to a 5 basis point rise on Tuesday.
· Euro zone bond yields rise ahead of Fed
Germany’s 10-year yields, which are closely correlated with Treasuries, rose in tandem, to its highest in over a week in early Wednesday trade at -0.224%, and was up nearly 3 basis points by 0706 GMT.
Italy’s 10-year bond yield rose broke another seven-month high at 0.851%.
· India’s coronavirus death toll surpasses 200,000 after record case surge
In the past 24 hours, 360,960 new cases were recorded, the largest single-day total in the world, taking India's total to nearly 18 million. A further 3,293 deaths, the deadliest day so far, took the death toll to 201,187.
· India's second COVID-19 wave may impede economic recovery, says S&P
Credit rating agency S&P Global said on Wednesday the second wave of COVID-19 infections in India could impede the country’s economic recovery and expose other nations to further waves of outbreaks.
S&P, which has a long-term credit rating of ‘BBB-’ on India, just one notch above junk, said it may have to revise its base-case assumption of 11% growth over fiscal 2021/2022, especially if wider containment measures are re-imposed.
S&P expects the consumer retail and airport sectors to have a dragged out recovery with localized lockdowns and curfews in several parts of the country, and said the Indian banking sector continued to face a “high level of systemic risk”.
· India’s Covid situation is causing production uncertainties: Maruti Suzuki
Maruti Suzuki Chairman RC Bharga discusses the impact of India’s Covid outbreak is having on the country’s largest automaker.
· UK plans to use health service app as vaccine proof for travel
Britain is working on using the existing National Health Service (NHS) coronavirus app to show that people have received their COVID-19 vaccine for international travel, Transport Secretary Grant Shapps said on Wednesday
· U.S. Republicans say 'not so fast' on restoring FTC power to claw back ill-gotten gains
Republicans at a hearing in the U.S. House of Representatives to discuss restoring the Federal Trade Commission's ability to claw back ill-gotten gains from companies deemed deceptive voiced doubts about quickly passing a bill unless it put some limitations on the agency.
· EU lawmakers clear post-Brexit trade deal with Britain
The European Parliament has voted overwhelmingly in favour of the post-Brexit trade deal between Britain and the European Union, clearing the last hurdle towards full ratification of the accord.
EU lawmakers backed the trade and cooperation agreement by 660 votes to five, with 32 abstentions, the parliament announced on Wednesday. The vote took place on Tuesday, but coronavirus working restrictions meant the result was not immediately known
· German consumer morale drops unexpectedly heading into May - GfK
German consumer morale deteriorated unexpectedly heading into May as rising COVID-19 infections led to a re-tightening of restrictions on shopping, travel and public life in many areas of Europe's largest economy, a survey showed on Wednesday.
The GfK research institute said its consumer sentiment index, based on a survey of around 2,000 Germans, fell to -8.8
points from a revised -6.1 in April.
· Japan's retail sales rise at fastest pace in five months
Japanese retail sales rose at the fastest pace in five months in March as consumer demand recovered from the huge hit it took from the coronavirus pandemic last year.
The world's third-largest economy has emerged from last year's slump on an export recovery, though a glacial vaccine rollout and a resurgence in infections are threatening household demand.
Retail sales jumped 5.2% in March from a year earlier, government data showed on Wednesday, a larger gain than the median market forecast for a 4.7% rise.
That marked the fastest rise since a 6.4% advance in October and the first positive growth in four months.
· Myanmar unity government tells ASEAN no talks until prisoners freed
Myanmar's pro-democracy unity government, which includes members of parliament ousted by the military coup, has told Southeast Asia's regional bloc that it will not engage in talks until the junta releases all political prisoners.
The 10-member Association of Southeast Asian Nations (ASEAN) has been trying to find a path for Myanmar out of a bloody crisis triggered by the Feb. 1 coup and has called for an end to violence and talks between all sides.
· Australia to upgrade military bases, expand wargames with U.S.
Australia will spend A$747 million ($580 million) to upgrade four military bases in its north and expand war games with the United States, Prime Minister Scott Morrison will say on Wednesday.
· Morgan Stanley sees 15% chance of Scottish independence from UK
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