WASHINGTON (dpa-AFX) - After two successive days of solid gains, the U.S. dollar was quite subdued on Wednesday, as traders seemed to take some profits ahead of the upcoming monetary policy meeting of the Federal Reserve.
Data from the U.S. Commerce Department that showed a substantial rebound in new home sales in the month of June weighed on greenback a bit.
The dollar index, which dropped to a low of 97.55 in the morning session, recovered well as the session progressed and was last seen hovering around 97.70, after rising to 97.75.
Against the euro, the dollar strengthened to 1.1128, before retreating slightly to 1.1137, but still up nearly 0.15% from previous close.
The euro dropped to its lowest levels in about two months against the greenback this morning on weak data and hopes about aggressive monetary easing by the European Central Bank.
The ECB is likely to alter the wording of its forward guidance on Thursday to give a clear signal that interest rates would be cut soon, and that policymakers are ready to add more stimulus if the euro area macroeconomic outlook deteriorates further.
Economists widely expect that rate cut to come in September in the form of a 10 basis points reduction to the deposit rate, which is already in negative territory at a record low -0.4%. A few economists expect the bank to cut interest rate tomorrow.
The euro zone services PMI slid to 53.3 from 53.6 in the previous month while the manufacturing PMI declined to 46.4 from 47.6 a month ago, hitting a 79-month low. The composite output index fell to 51.5 from 52.2 in June.
Germany's private sector grew at the slowest pace in four months in July as the downturn in manufacturing continued, flash data from IHS Markit showed. The flash composite purchasing managers' index, or PMI fell to 51.4 in July from 52,6 in June. Economists had forecast a score of 52.3.
France's private sector grew at a slower pace in July, survey results from IHS Markit showed. The flash composite output index fell to 51.7 in July from 52.7 in June. The score was forecast to drop to 52.5.
Against Pound Sterling, the dollar weakened to 1.2522 early on in the day, but recovered to 1.2480 in late afternoon trades, still trailing more than 0.3% from previous close.
Against the Yen, the dollar was flat at 108.21, recovering from a low of 107.94 yen a dollar.
The dollar was up slightly against the loonie and Swiss franc, with the respective pairs quoting at 1.3144 and 0.9855. Against the Aussie, the dollar gained 0.4% at 0.6977.
Data released by the Commerce Department showed new homes sales in the U.S. showed a substantial rebound in the month of June. The report said new home sales increased by 0.7% to an annual rate of 646,000 in June, after plunging by 8.2% to a revised rate of 604,000 in May. Economists had expected new home sales to jump by 5.4% in June.
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