The US dollar weakened against a basket of its major peers on Tuesday, as traders anticipated a monetary policy decision from the Federal Reserve that will be released on Wednesday. The greenback failed to harness enough strength from solid gains in the real estate market, as the spotlight remained on possible hints of future interest rates tomorrow.
Prices of federal funds futures showed that investors are pricing in a 98.6% chance that the Federal Open Market Committee will keep interest rates unchanged tomorrow. However, the committeeâs statement may contain hints on whether policymakers plan to raise interest rates one more time before the end of the year.
The statement may also contain details on the Federal Reserveâs plan to begin reducing its massive balance sheet. The Federal Open Market Committee is scheduled to hold two more meetings this year, and the CME FedWatch tool shows a 56.4% chance of a decision to raise rates in the last meeting.
Anticipation for the statement tomorrow reduced tradersâ appetite for risk, despite impressive housing data that was released by the US Department of Housing and Urban Development earlier today. The number of building permits increased 5.7% from 1.230 million in July to 1.300 million in August, which opposed forecasts that pointed to a 0.8% drop.
Meanwhile, housing starts lost 0.8% from 1.190 million in July to 1.180 in August, which was still more than the 1.175 million housing starts that analysts expected. The data revealed that Hurricane Harvey had a little impact on the housing market, while Hurricane Irma did not reach the United States until September.
Geopolitical developments between the United States and North Korea were in focus today. Investors are still digesting the latest comments from US President Donald Trump, which were made in front of the United Nation General Assembly. The president said that the United States may have to totally destroy North Korea if the Asian country continued to threaten the use of nuclear weapons.
EUR/USD traded at 1.1974 as of 15:45 GMT on Tuesday after touching 1.2004 at 06:35 GMT, the pairâs highest level since December 2014. EUR/USD began trading today at 1.1961.
The Dollar Index, which tracks the performance of the US currency against its major counterparts, dropped to 91.94 as of 15:39 GMT today from 92.04 yesterday.
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