The US dollar remains unchanged this morning, and has traded within a narrow range of 0.17 percent in the last 12 hours. Global growth concerns resurfaced with a negative earning reporting release of industrial bellwether Caterpillar and other important technology companies such as Nvidia. There was an equity sell off in North America and currencies such as the Japanese Yen outperformed commodity currencies (e.g. the Canadian dollar) and emerging market currencies (e.g. the Mexican Peso).
With only one day before the FOMC rate decision, dovish Fed rhetoric has weighed on the Greenback, with even Kansas City President Esther George (a renowned hawk on interest rates) urging the Fed to be patient on rates. The focus is now on Wednesday's policy statement, and comments from Chairman Powell at the press conference afterward.
This morning, we have a “risk on” environment, which is not helping the US dollar. Additionally, markets are pricing a low probability of rate hikes this year. Aside from the Fed, any signs of progress in U.S.- China trade negotiations could push the Greenback lower as “risk on” sentiment rises, even though it is unlikely that a deal will be concluded at this week’s meeting. Of course, the US dollar performance is also dependent on other currencies’ inherent strengths or weaknesses, as occurred with the Euro yesterday. The EUR/USD pair appreciated 0.23 percent (a weaker US dollar) in yesterday’s trading session.