Dollar weakens ahead of FOMC meeting

Aussie dollar – The Aussie was braced for hawkish rhetoric from the RBA minutes on Tuesday, yet was let down by a laissez-faire approach. The Reserve Bank said that it would be prudent to maintain its 4.75% benchmark in the face of a potential worsening in the European debt drama. The Aussie slipped in response to the minutes and touched $1.0532 before rising later in the New York session to $1.0603. The Aussie is likely to remain slave to international events with downside economic risks playing an increasingly important role. With the bulk of monetary tightening behind it, the tone of the RBA's caution seems to be one of indifference to further rate increases on account of downside economic risks elsewhere.

Japanese yen – The yen remained above ¥80 per dollar for another session although weakness in the Japanese economy remains a heavyweight on the value of the dollar, dragging it down against the Japanese unit. The euro advanced to ¥115.19 while the pound eased to ¥129.90.

Canadian dollar – The Canadian dollar advanced despite weakness in April retail sales. Dealers bought the unit in light of advancing risk appetite and weakness in the U.S. dollar. The Canadian dollar advanced to $1.0262 U.S. cents after the government said retail sales rose 0.3% with six of 11 subsectors accounting for 71% of overall sales advancing. Without motor vehicle sales the report was flat for the month. Leading indicators using latest data available through May rose by 1% after rising by 0.9% in April. That report is a barometer of the future health of the economy.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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