REFILE-FOREX-Dollar bides time ahead of anticipated Fed rate cut

Published 30/10/2019, 10:40
© Reuters.  REFILE-FOREX-Dollar bides time ahead of anticipated Fed rate cut
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(Refiles to fix typo in headline, no other changes to text)
* US Fed tipped to end 2-day meeting with 25 bps rate cut
* Advance reading of US Q3 GDP due
* UK to hold general election on Dec 12 to break Brexit
deadlock
* US-China deal may not be ready for signing at APEC summit
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Dhara Ranasinghe
LONDON, Oct 30 (Reuters) - The dollar was steady against
other major currencies on Wednesday as investors braced for a
rate cut by the U.S. Federal Reserve and an advance reading of
economic growth in the third quarter that could shed light on
the rate outlook.
Sterling was also stable, holding below recent five-month
highs, after Britain's lower house of parliament approved
calling an early election in December that might break the
Brexit deadlock. For now the spotlight turned to the Fed, which is expected
to cut its policy rate for a third time in a row when it
concludes its two-day meeting on Wednesday. An advance reading of economic growth data in the third
quarter was also expected to be scrutinized for clues on the
economic outlook, coming ahead of other major data releases such
as Friday's key non-farm payrolls report.
"In the last 4-5 weeks there has been a concern that the
consumer part of the market is starting to slow and that could
mean more cuts next year," said Derek Halpenny, European head of
global markets at MUFG in London.
"So what lies ahead post the Fed meeting, the GDP data,
payrolls will shape market expectations in addition to what (Fed
chief Jerome) Powell will say today."
The dollar was steady against the euro at $1.1117 EUR= and
marginally lower versus a basket of six major currencies at
97.630 .DXY .
Against the yen, the greenback was also little moved at
108.86 yen JPY= , not far from its three-month high of 109.07
yen touched on Tuesday.
Investors are watching for any indication that further cuts
are likely, with futures pricing suggesting more easing is
expected in 2020. If that is not foreshadowed, traders expect
the dollar to rise.
"If the market is going to price in the end of current
rate-cut cycle, the dollar/yen could climb above 110 yen," said
Tohru Sasaki, head of Japan markets research at JPMorgan Chase
Bank.
"On the other hand, if the market is going to price in two
more cuts after this month's expected cut, the pair could fall
to mid-107 yen level," he added.

RISK ASSETS
Optimism that Washington and Beijing would finalise the
first-stage of a trade deal next month had boosted risk assets
in recent days, but markets have turned wary.
A U.S. administration official said on Tuesday an interim
trade agreement between the United States and China might not be
completed in time for signing on the sidelines of an
Asia-Pacific summit in Chile next month, but that does not mean
the accord is falling apart. The Chinese yuan inched up marginally as investors awaited
the outcome of the Fed meeting and more clarity on how Sino-U.S.
trade negotiations are going.
In the spot market, offshore spot yuan CNH=EBS was last
changing hands at 7.0580, a touch firmer on the day.
Earlier in the onshore market, the People's Bank of China
(PBOC) set the midpoint rate CNY=PBOC at a two-month high of
7.0582 per dollar, 35 pips firmer than Tuesday's fix.
Sterling meanwhile drew support from hopes that a disorderly
Brexit can be avoided.
Britain will hold its first December election in almost a
century after Prime Minister Boris Johnson won approval from the
House of Commons on Tuesday for an early ballot aimed at
breaking the deadlock over the UK leaving the European
Union The British pound was last at $1.2874 GBP=D3 , little
changed on the day and below five-month highs hit earlier this
month. It was also steady at 86.34 pence EURGBP=D3 .
"Johnson has cross-party support and (the opposition) Labour
Party has lost a fair lot of the credibility it had in the 2017
election," said MUFG's Halpenny.
"So that's reflected in the stability in sterling - markets
believe the Conservative party will hold on to power and have a
Brexit deal agreed with the EU."

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