Reuters: US Dollar Report: FOREX-Euro falls vs dollar before Fed, ECB decisions

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro falls vs dollar before Fed, ECB decisions Aug 1st 2012, 17:22 Tweet Share this Email Print Wed Aug 1, 2012 1:22pm EDT * Federal Reserve seen in wait-and-see mode * Focus on whether ECB acts after Draghi's pledge By Julie Haviv NEW YORK, Aug 1 (Reuters) - The euro nudged lower against the dollar in choppy trade on Wednesday as investors refrained from placing large bets ahead of monetary policy decisions in the United States and the euro zone. The dollar will likely react to a U.S. Federal Reserve policy decision at the conclusion of its two-day meeting in the afternoon. Analysts expect the Fed to stop short of announcing aggressive measures to tackle a weak economy but nevertheless signal it is ready to act. While most expect the Fed to hold off on more stimulus, perhaps until September, an announcement of a third round of bond buying, called quantitative easing, would likely rattle financial markets and weigh on the dollar. That's because QE3 is tantamount to printing money and dilutes its value. "We think if the Fed indicates a wait-and-see approach it could lead to some disappointment and would weigh on the euro/dollar," said Adam Myers, senior currency strategist at Credit Agricole in London. He added that even if the Fed surprised and announced fresh measures, the likely chance of disappointment from the ECB on Thursday would cap any euro gains. Investors are gearing up for possible European Central Bank action on Thursday to tackle the region's debt crisis but they are also mindful of the risk of disappointment. "With the Fed meeting today, the ECB and BoE (Thursday), and the BoJ next week, market participants are gearing for policy action or at the very least accommodative rhetoric within the upcoming press conferences and policy statements," said Eric Theoret, currency strategist at Scotiabank in Toronto. The euro was last down 0.1 percent at 1.2294, under some pressure after German Bundesbank President Jens Weidmann said governments overestimated the ECB's capacities and placed too many demands on it. The single currency was supported above Monday's low of $1.2225 but remained below a three-week peak of $1.2390 struck after comments from ECB President Mario Draghi last week, which raised expectations the ECB might resume its bond purchase program, lowering borrowing costs for Spain and Italy. Draghi last week boosted the euro and riskier assets by pledging to do everything necessary to preserve the euro. But many analysts and traders say the impact of any ECB action would in any case be temporary without a sustainable economic recovery in battered southern Europe. Much of the euro zone is in a recession and record high joblessness across the region is likely to keep alive chances of more interest rate cuts by the ECB in the near term, keeping sentiment towards the euro bearish. Euro zone data painted a gloomy picture for the region, with business surveys on Wednesday showing the region's manufacturing sector contracted for an 11th successive month. The dollar was up 0.1 percent against the yen at 78.18 yen . Data showing the U.S. private sector added more jobs than expected in July gave the dollar a boost. But the main highlight in U.S. trading will be the Fed's statement where it is likely to mark down expectations for growth but hold back from further easing. "Fed actions will continue to disappoint, even though its language will likely temper the inaction," Barclays Capital said in a report. "This should be dollar supportive on tighter than expected monetary stance and on a somewhat disappointed risk sentiment." Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions