Greenback Falls Slightly After Beige Book Shows Concerns on Trade

The US dollar fell slightly after the Federal Reserve released the Beige Book yesterday. The Beige Book is a publication by the Fed that highlights the current economic situation across 12 Fed districts. The document showed that officials believe that the economy is doing well with the tighter labour market leading to significant skilled worker shortages.

The document also highlighted that business and consumer confidence was rising across the country. Many business executives however pointed to concerns about trade as the US and its largest trading partners confront each other. The Beige Book was released a few hours after data from the Census Bureau found that personal incomes rose to more than $60,000 in 2017. This was the highest level recorded as poverty rates declined significantly.

The dollar movement came as Fed governor Lael Brainard said that further gradual interest rate rises were likely to be appropriate over the next few years due to the current strength of the economy. With unemployment at 3.9% and inflation near the Fed’s 2.0% goal hikes can be expected.

The euro and pound were little moved against the USD as traders wait for monetary policy decisions from the ECB and BoE. The BoE will be the first bank to release its interest rate decision at 1100 (GMT). Traders don’t expect any changes on monetary policy. However, they will look at the number of officials who will favour tightening. Thirty minutes later, the ECB will release its decision. Still, traders don’t expect any changes from the ECB. They will look ahead to the statement for clarity about the QE and interest rates hikes.

The Aussie jumped in the Asian session after Australia released better-than-expected employment numbers for August. During the month, 44K people were employed, which was higher than the 16.5K traders were expecting. It was a jump from July’s job losses of 4.3K. The participation rate moved higher to 65.7%, which was higher than the 65.6% traders were expecting. The unemployment rate remained unchanged at 5.3%. These numbers were positive for an economy that is facing a challenging drought.

EUR/USD

The euro moved up slightly against the dollar during the Asian session. It is now trading at 1.1635, which is slightly above the upper side of the triangle line shown below. It is also above the 61.8% Fibonacci Retracement level and along the important resistance line of 1.1658. Today, the pair will remain within this range as traders wait for the ECB.

AUD/USD

The AUD/USD pair reached the lowest level since 2016 yesterday. Today, the pair jumped after positive employment numbers from Australia. It is now trading at 0.7190, which is the highest level since Friday last week. This level is along the 23.6% Fibonacci Retracement line and above the 28 and 14-day EMA. With the two EMAs crossing one another, it could be an indication that an upward trend is beginning.

EUR/GBP

Today, the ECB and BoE will release their monetary policy decision. This means that the EUR/GBP pair will be very active today. On Friday, the pair crossed the important support level of 0.8945. This was a major trendline that the pair has been following since April. This week, it has stayed below the level and yesterday, it reached a low of 0.8870. Today, it is trading at 0.8920. On the four-hour chart below, the 100 and 50-day EMA crossed over, which is an indication that the downward momentum could continue. However, this will depend on the monetary policy from the BoE and ECB.