Dollar Mired Near Fresh Lows by Korman Tam

The greenback remains under pressure as traders position ahead of this week’s closely anticipated FOMC monetary policy setting meeting. Fed funds futures are fully pricing in a 25-basis point rate cut to 4.50%, thereby dragging the dollar to fresh record lows against the euro at 1.4437 and a new multi-decade lows versus the Loonie at 0.9576 and Aussie at 0.9270.

Although the Fed is largely expected to ease by 25-bp, the dollar’s direction will likely be dictated by the accompanying FOMC policy statement and whether further easing can be anticipated. We look for the Fed to maintain a largely neutral stance in its policy statement, with an emphasis on the preemptive nature of the cut “to forestall some of the adverse effects on the broader economy”, as stated last month.

Several key pieces of US economic data are slated for release this week including Q3 GDP, Chicago PMI, September PCE, October manufacturing ISM, September durable goods orders, factory orders and the October labor report. Economic growth in the third quarter is estimated to slip to 3.0%, down from 3.8% previously. Meanwhile, October non-farm payrolls are expected to slip to 80.0k, versus 110.0k from September. The unemployment rate is seen unchanged at 4.7%. Nevertheless, garnering the lion’s share of market attention will be the Fed’s two-day policy setting meeting and accompanying statement scheduled for Wednesday at 2:15 PM.Euro Climbs to New All-Time High

The single currency rallied to a fresh high against the dollar at 1.4437 and recovered further versus the yen toward 165.47. Economic data released from the Eurozone overnight saw Germany’s preliminary CPI and HICP. The October CPI in the Eurozone’s largest economy edged up 0.2% m/m and 2.4% on an annualized basis, versus expectations for an increase of 0.1% m/m and 2.4% y/y. The October preliminary HICP was in line with forecasts, up 0.2% m/m and 2.7% y/y.

EURUSD continues to hold steady above the 1.44-level, with resistance emerging at 1.4440 and 1.4470. Subsequent ceilings are seen at 1.45 and 1.4550. On the downside, support begins at 1.44, followed by 1.4380 and 1.4350. Additional floors are eyed at 1.43, backed by 1.4250 and 1.4220.