The greenback was mixed in the Tuesday session, advancing versus the euro while relinquishing gains against the sterling and the yen. The economic calendar saw the release of the April consumer confidence survey, which declined to 62.3, albeit less than expected, from 64.5 from March.
The major currency pairs will likely trade within range ahead of the FOMC policy decision tomorrow afternoon. We expect the Fed to ease policy by 25-basis points to 2.0% while maintaining a downbeat outlook on the economy similar to its previous statement. Nonetheless, we anticipate the Fed to leave policy unchanged for the remainder of the year after this week's rate cut given the aggressive easing that has already materialized.
Pound Slumps on Soft Housing Data
The sterling slumped across the board, falling to 203.52 versus the yen at 1.9678 against the dollar. The catalyst for the decline in the pound was economic data reinforcing the continued weakness in the UK housing market. Mortgage approvals in March fell to its lowest levels since 1993 at 64k, exceeding the estimated decline to 65k from 73k in February. Mortgage lending fell to 6.93 billion sterling, versus 7.45 billion sterling a month earlier.
In the coming session, housing data will again garner the market's attention with April nationwide housing prices due out at 2:00 AM. Home prices are seen posting a 0.5% decline versus a 0.6% fall in March, while posting a flat reading compared with a 1.1% increase in the previous year.
We continue to remain bearish on the sterling, with initial support against the dollar seen at 1.9650, followed by 1.96 and 1.9540. Additional support is seen at 1.95, backed by 1.9470 and 1.9430. On the upside, resistance is seen at 1.97, followed by 1.9750 and 1.98. Subsequent ceilings will emerge at 1.9840, followed by 1.9880 and 1.9940.
Euro Mired Near Multi-Week Lows
The euro continues to struggle against the dollar, falling to its lowest level in 3 Â½ weeks at 1.5541 amid weakness in the earnings of Deutsche Bank. Economic data from the Eurozone will be closely analyzed, including Germany's April labor report, Eurozone March labor report, Eurozone sentiment surveys and flash inflation. Germany's unemployment rate is seen holding steady at 7.8%, while the unemployment change is estimated at minus 30k versus minus 55k. The March Eurozone unemployment rate is expected to remain unchanged at 7.1%.