Fed fund futures were implying a 23 percent chance of a rate increase at tomorrow’s meeting. This marks a fall of 2 percent since yesterday. Polls carried out by Reuters and CNBC showed economists are evenly split over whether the Fed will opt to begin raising rates during this meeting or wait.
Despite disappoiting retail sales numbers the dollar was trading higher across most pairs on Tuesday as traders started to increase bets that the Federal Reserve might opt to begin raising rates this meeting. Yields on longer data US treasuries increased.
EUR/USD tacked lower for a second day reaching as low as 1.1257. Traders were selling into rallies which drained EUR/USD of any upward momentum for much of the day. EUR/USD continued its descent which began yesterday and was meeting support at 1.1281 and 1.1257.
The US dollar was locked in directionless trade on Monday ahead of a crucial meeting of the Federal Reserve. This week’s two-day Fed meeting is the first one in nine years in which markets see a realistic chance that interest rates could actually be raised.
Cable extended a strong rally today as traders welcomed a neutral statement from the Bank of England’s monetary policy committee. Interest rates were kept fixed at 0.5 percent – a decision that was widely anticipated.
UK manufacturing activity fell in July according to recent figures. Manufacturing production fell by 0.8 percent in July. Analysts had expected a small rise of 0.2 percent on the month, so the release had a negative impact on sterling.