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Dollar Drops Ahead of Fed Rate Decision as Euro Edges Higher

12/18/2018, 10:44:31 AMBasics of Trading
Dollar Drops Ahead of Fed Rate Decision as Euro Edges Higher

The U.S. dollar fell against its rivals Monday as downbeat regional manufacturing data weighed on sentiment ahead of Federal Reserve decision due Wednesday.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.41% to 96.15.

The Empire State manufacturing index fell 12.4 points in December to a reading of 10.9, the New York Federal Reserve said Monday.

The downbeat report comes just days ahead of a widely expected Federal Reserve rate hike due Wednesday, though the bulk of attention will likely focus on the central bank's expectations about rate hikes for the upcoming year, with many predicting a more dovish outlook.

In September, the Fed projected three rate increases for next year, but some are expecting the Fed policymakers to signal just two rate hikes for next year as the boost to the U.S. economy from President Donald Trump's tax cuts begin to wear off and as global growth continues to wobble.

The dollar was also pinned back by a rise in the euro as investors cheered some progress on the Italy budget problem after Prime Minister Giuseppe Conte struck a deal with populist leaders to submit a revised budget proposal to the European Commission.

EUR/USD rose 0.43% to $1.1356.

GBP/USD rose 0.29% to $1.2623, but gave up some gains as Labour leader Jeremy Corbyn tabled a motion of no confidence in Theresa May after the Prime Minister revealed lawmakers would not have the chance to vote on the Brexit deal until at least Jan. 14.

USD/CAD, meanwhile, rose 0.13% to C$1.13403 as the loonie came under pressure amid falling oil prices.

The yen, meanwhile, was buoyed by a flight to safety as global markets tumbled.

USD/JPY fell 0.57% to Y112.74.