The Dollar fell for a second straight session on Wednesday, weighed down by surprisingly weak US durable goods orders and remarks by ECB chief Jean-Claude Trichet that Euro-zone rates were at the right level. Analysts said Trichetâ€™s comments, with news that German and French business confidence unexpectedly improved in March, dampened expectation of a soon ECB interest rate cut. That left investors focusing on the widening interest rate differential between the US and the Euro zone. It drove the Euro to a session high of 1.5859, close to all-time peak of 1.5905 touched last week.
The Federal Reserve has slashed its benchmark overnight lending rate by 3% to 2.25% since mid-September, while the ECB has kept its rate at 4%. Lower interest rates make Dollar-denominated assets less attractive.
Yesterday, EurUsd was up 1.35% at 1.5821. UsdJpy dropped to a session low of 98.77 before rebounding to 99.16, down 0.92%. UsdChf dropped 1.68% to 0.9918. The Dollar losses against the Yen and the Swiss franc were attributed to declining US stocks.
Interest rate futures are pricing in a roughly 46% chance of a 50bp cut in the Fed funds rate target next month, to 1.75%
Data on Wednesday showed new orders for long-lasting US goods declined 1.7% last month and a key measure of companiesâ€™ appetite for investment also contracted. Pace of New Home Sales fell to an annual rate of 590k from a upwardly revised 601k in January. Poll of economists were expecting sales to fall to 580k.