The U.S. dollar falls to the lowest rate for the year as investors dump the greenback for higher yielding assets.

  • Speculation of a global economic recovery is increasing in strength as more economic data post better than expected results.  The EURUSD rallied over 150 pips reaching a new high for the year at 1.4842, the lowest level since September, 2008.
  • The greenback retreated against 15 of its 16 major counterparts as analysts forecast today's FOMC meeting will leave the benchmark interest rate between zero and 0.25 percent.  The Federal Reserve may even signal its intention on holding down borrowing costs and discuss how to wind down purchases of mortgage-backed securities.
  • The G-20 summit is scheduled to start tomorrow and it is expected the dollar will remain under selling pressure as the group moves towards reforming the international monetary system.  The Italian and Australian Prime Ministers both wrote to US President Obama urging him to make the fight against financial speculation and market manipulation the key topic of discussion at the G-20 meeting.
  • New Zealand unexpectedly expanded for the first time in six quarters on rising consumer spending and exports of logs and dairy products.  The nation's GDP increased 0.1% in the three month to June 30 following a 0.8% drop in the first quarter, beating estimates of a -0.2% contraction.  The New Zealand dollar surged to a 13-month high as traders increased bets that the Reserve Bank may raise interest rates sooner than previously indicated.

Currency to watch out for: EURUSD & GBPUSD

  • The EURUSD pivot point is at 1.4775 with a preference to enter into long positions at 1.4785
  • The GBPUSD pivot point is at 1.6350 with a preference to enter into long positions at 1.6360

Today's calendar and market movers:

  • EU Flash Manufacturing PMI expected to rise to 49.7
  • UK MPC Meeting Minutes expected to show all nine members voted to hold the interest rate
  • EU Industrial New Orders month on month expected to drop to 2.0%
  • US Crude Oil Inventories expected to rise to -1.4 million barrels
  • US FOMC Statement and Federal Funds Rate expected to remain unchanged at zero to 0.25%

Stocks:

  • US stocks rose on Tuesday on bets that the US Federal Reserve will maintain its policy to foster economic recovery.  The Dow closed higher 0.5%, the S&P up 0.7% and the NASDAQ up 0.4%.
  • As of 06:10 GMT the Nikkei is trading at -0.7% and the Hang Seng at -0.43%.