Dollar slips lower ahead of Fed meeting

The dollar was weaker against the euro and the yen on Tuesday as ongoing uncertainty over when the Federal Reserve will start to taper its asset purchase program weighed.

During European morning trade,EUR/USD rose to session highs of 1.3782 and was last up 0.05% to 1.3768.

Demand for the euro continued to be underpinned after data on Monday showed that the euro area’s composite purchasing managers’ index rose to a three month high in November, indicating that European Central Bank policymakers will not need to step up stimulus measures. 

USD/JPY hit session lows of 102.88, down from Friday’s five year highs of 103.91, and was last down 0.13% to 102.87.

Sentiment on the dollar remained fragile ahead of the outcome of the Fed’s two-day policy meeting on Wednesday, with some expecting the bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.

Markets were turning their attention to U.S. inflation data due out later in the session amid concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer.

The pound was higher against the dollar, with GBP/USD rising 0.15% to 1.6323 ahead of U.K. data on consumer prices.

The dollar was trading close to two year lows against the Swiss franc, with USD/CHF dipping 0.04% to 0.8868, holding just above the lows of 0.8839 struck last Wednesday.

The greenback was steady near three month highs against the Australian dollar, with AUD/USD edging down 0.04% to 0.8944.

Earlier Tuesday, the minutes of the Reserve Bank of Australia’s December meeting left the door open for further rate cuts, but said it was important to first see the effects of earlier cuts.

The U.S. dollar was lower against its New Zealand and Canadian counterparts, with NZD/USD up 0.22% to 0.8275 and USD/CAD down 0.18% to 1.0576.

The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, edged down 0.04% to 80.21. 

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EUR/GBP: Bullish, Follows Through Higher

EUR/GBP: The risk of further upside is now seen with a follow through higher on its past week corrective recovery underway. This development has exposed the 0.8463 level. It must break and hold above that level to create scope for further offensive.

However, if this fails to occur expect a return to the 0.8350 level to happen. Further down, support lies at the 0.8251 level with a cut through here aiming at the 0.8200 level. A clearance of here will turn attention to the 0.8150 level.

Conversely, a follow through higher on the back of its gain could see it targeting the 0.8463 level and then the 0.8500 level. A violation will aim at the 0.8584 level.

Further out, a cut through here will resume its upside towards the 0.8650 level. All in all, the cross remains biased to the upside on correction.

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U.S. oil futures edge lower ahead of supply data, Fed meeting

U.S. oil futures edged lower on Tuesday, as market players awaited key U.S. weekly supply data to gauge the strength of oil demand from the world’s largest consumer.

Investors also awaited the outcome of the Federal Reserve's two-day policy meeting on Wednesday.

On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in February traded at USD97.45 a barrel during European morning trade, down 0.35%. New York-traded oil futures held in a range between USD97.33 a barrel and USD97.72 a barrel.

Nymex oil futures were likely to find support at USD96.27 a barrel, the low from December 13 and resistance at USD98.17 a barrel, the high from December 12.

The February contract ended up 0.87% to settle at USD97.77 a barrel on Monday after upbeat manufacturing data out of the euro zone and the U.S. boosted optimism over the global economy.

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 3.5 million barrels in the week ended December 13.

Traders have been concerned over rising U.S. inventories and increased production levels in recent weeks.

Investors remained cautious ahead of the outcome of the Fed’s two-day policy meeting on Wednesday, with some expecting the central bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.

Markets were turning their attention to U.S. inflation data due out later in the session amid concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for February delivery shed 0.25% to trade at USD109.16 a barrel, while the spread between the Brent and U.S. crude contracts stood at USD11.71 a barrel.

London-traded Brent prices rallied 1.01% on Monday to settle at USD109.41 a barrel amid renewed concerns over a disruption to supplies Libya
.

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European stocks decline amid Fed jitters; Dax down 0.40%

European stocks decline on Tuesday, as markets were jittery ahead of the Federal Reserve's highly anticipated policy meeting, due to begin later in the day. 

During European morning trade, the EURO STOXX 50 retreated 0.60%, France’s CAC 40 tumbled 0.96%, while Germany’s DAX 30 dropped 0.40%. 

Investors remained cautious ahead of the outcome of the Fed’s two-day policy meeting on Wednesday, with some expecting the bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.

Markets were also eyeing U.S. inflation data due out later in the session amid concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer. 

European equities had found support on Monday after data showed that the euro area’s composite purchasing managers’ index rose to a three month high in November, indicating that European Central Bank policymakers will not need to step up stimulus measures. 

Manufacturing activity in Germany rose to a 30 month high but the contraction in France deepened in November, sparking concerns that the country could fall back into a recession. 

Financial stocks were broadly lower, as French lenders BNP Paribas and Societe Generale declined 0.87% and 0.70%, while Germany's Deutsche Bank slid 0.42%. 

Among peripheral lenders, Spanish banks BBVA and Banco Santander both slipped 0.20%, while Italy's Unicredit and Intesa Sanpaolo retreated 0.66% and 0.67% respectively. 

Elsewhere, Rexel tumbled 1.82% as Ray Investment SARL said it will sell a 7% stake in the electrical-equipment distributor. 

On the upside, Zurich Insurance Group rallied 1.64% after Swiss Re Ltd.’s Chief Financial Officer George Quinn quit to join Switzerland’s biggest insurer. 

In London, commodity-heavy FTSE 100 lost 0.54%, weighed by losses in the energy sector. 

Shares in oil and gas major BP plummeted 1.44%, while rivals Anglo American and Petrofac retreated 1.89% and 1.92%. 

Mining companies were also on the downside, as Glencore Xstrata shed 0.44% and Rio Tinto declined 0.54%, while Vedanta Resources and Polymetal dropped 0.75% and 0.87% respectively. 

In the financial sector, the Royal Bank of Scotland inched down 0.06% and Lloyds Banking shed 0.30%, while Barclays retreated 0.74% and HSBC Holdings tumbled 0.96%. 

In the U.S., equity markets pointed to a moderately lower open. The Dow Jones Industrial Average futures pointed to a 0.06% dip, S&P 500 futures signaled a 0.12% fall, while the Nasdaq 100 futures indicated a 0.13% loss. 

Later in the day, the ZEW Institute was to release its closely watched report on German economic sentiment. The euro zone was also to publish data on consumer inflation.
 

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