By Peter Nurse
Investing.com - The dollar edged lower in early European trade Tuesday, with traders keeping a risk-on tone ahead of this week’s Federal Reserve meeting.
At 3:05 AM ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 92.920, with EUR/USD up 0.2% at 1.1889, ahead of the release of Germany's ZEW index for September, the first of the major business surveys to be released this month.
AstraZeneca (NYSE:AZN) resuming the U.K. clinical trials of its COVID-19 vaccine candidate, and Pfizer (NYSE:PFE) looking to expand phase 3 trials for their own candidate have helped the market take a much more positive attitude towards risk.
“It was uplifting that Pfizer has made clear a target of vaccines. As risk assets bounced back, the dollar has lost momentum,” Societe Generale (OTC:SCGLY) director of forex Kyosuke Suzuki told Reuters.
Still, investors will exhibit some caution ahead of the Federal Reserve’s two-day policy meeting, starting later Tuesday, after it adopted a new approach last month to meeting its 2% inflation target.
The Fed will also update its projections for the economic and interest rate outlook, which will include forecasts for 2023 for the first time.
Elsewhere, GBP/USD edged up 0.1% to 1.2858, despite the continuing turmoil surrounding Brexit negotiations and a weakening in the country’s employment market.
An initial parliamentary vote on the U.K.’s controversial bill to violate the Brexit agreement with the European Union passed on Tuesday, but not without heated debate. The EU has warned that the passage of the U.K.’s bill would lead to a collapse in negotiations, increasing the possibility of a no-deal Brexit.
Britain’s labor market took a turn for the worse in the summer, even as the economy gradually reopened. Employment fell by 102,000, the first decline since April, while the July unemployment figure climbed to 4.1%, from 3.9% the previous month.
Additionally, USD/CNY traded 0.3% lower at 6.7856, after posting a 16-month low of 6.7793 earlier Monday. Helping the tone were the latest Chinese economic data, suggesting the second-largest economy in the world was recovering from the Covid-19 hit.
Retail sales increased 0.5% year-on-year in August and industrial production jumped 45.6% year-on-year. Both figures beat expectations, with retail sales, in particular, reporting their first increase in 2020.
The Turkish lira posted a new low versus the dollar, with USD/TRY 0.1% higher at 7.4861, just off the 7.4969 level reached earlier Tuesday. The Turkish currency is still suffering from Moody’s decision late Friday to downgrade Turkey’s long-term credit rating further into speculative grade.