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The dollar depreciated to a three- week low against the euro on speculation the Federal Reserve may buy more bonds to bolster the economy, while stocks and U.S. futures were little changed. Copper and cotton gained as Spanish and Portuguese bonds dropped.
Fed policy makers meeting today may signal a willingness to boost debt purchases beyond the $600 billion already announced to spur job growth. Federal Reserve Chairman Ben S. Bernanke told CBS Corp.’s “60 Minutes” on Dec. 5 that the recovery may not be self-sustaining and more bond buying is “certainly possible.” The European Central Bank increased its bond purchases to 2.67 billion euros ($3.6 billion) last week, the highest in 23 weeks.
The dollar is down because of “the expectation for the Fed to reiterate its enthusiasm for future quantitative easing measures,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. “The surprise to the forex market would be if the Fed goes quiet on further QE measures ahead.”
EUR/USD: Sails through earlier highs/resistance at $1.3470/75, with the added demand extending highs to $1.3498. Move triggers further stops, with the illiquid conditions continuing to exaggerate effect. More stops noted above $1.3500 with first notable sell interest remaining in place at $1.3515/20.
GBP/USD: Spiked up from around $1.5860 to $1.5900 on release of stronger than forecast UK inflation data, with rate holding firm. Offers seen placed toward the earlier high at $1.5911, a break of $1.5915/20 to open a move on toward $1.5930 ahead of stronger resistance at $1.5050/55. Support seen back at $1.5860/50.
USD/JPY: eased to Y82.80.
US data starts at 1245GMT with the weekly ICSC shopping center sales data, although the main data starts at 1330GMT with retail sales and PPI. Retail sales are expected to rise 0.7% in November. Industry auto sales stable in the month, while gasoline prices rose further according to AAA. Sales excluding motor vehicles are expected to rise 0.7% on the higher gasoline prices as well as solid early holiday sales. Producer prices are expected to rise 0.7% in November. Both food and energy prices are expected to move higher. The core PPI is expected to rise 0.3% after the surprise 0.6% drop in October, when seasonal adjustment issues with vehicle prices were a key factor.
The much-awaited FOMC announcement will be the main feature of the US session with the announcement due around 1915GMT.
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