US Dollar Falls Early Wednesday as ADP, FOMC Take Center Stage

The US dollar declined further against its major trading partners early Wednesday as markets await the ADP private payrolls data at 8:15 am ET and the Federal Open Market Committee’s rate decision at 2:00 pm.

The key event for the day is the FOMC’s announcement, which is widely expected to result in a further 25 basis point increase in the federal funds rate target range to 5% to 5.25%. The real focus, however, will be on any indication this will be the last increase in the cycle — or if there may be more to come.

Following the release of the statement, Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference at 2:30 pm ET.

The ADP data are expected to show a 148,000 gain in private payrolls in April after an increase of 145,000 in March. Analysts suggest there is only a modest correlation between the ADP data and the monthly employment report scheduled for Friday, but it will be watched closely in any case.

Other events on Wednesday’s calendar include the Treasury’s quarterly refunding announcement at 8:30 am ET, an update to S&P Global’s manufacturing estimate for April at 9:45 am ET, the Institute for Supply Management’s manufacturing reading for April at 10:00 am ET and the weekly petroleum stocks inventory at 10:30 am ET.

Earlier Wednesday, the Mortgage Bankers Association said applications for new home purchases declined in the week ended April 28 despite lower mortgage rates. Refinancing applications increased in the week.

A quick summary of foreign exchange activity heading into Wednesday:

USDEUR rose to 1.1033 from 1.0999 at the Tuesday US close and 1.0959 at the same time Tuesday morning. The EU unemployment rate slipped to 6.5% in March from 6.6% the previous month, data released earlier Wednesday showed. The European Central Bank is expected to raise its target rate by 25 basis points at its meeting on Thursday. ECB member Elizabeth McCaul is scheduled to speak at 8:00 pm ET.

GBPUSD rose to 1.2511 from 1.2468 at the Tuesday US close and 1.2470 at the same time Tuesday morning. There are no UK data to be released Wednesday. The next Bank of England meeting is scheduled for May 11.

USDJPY fell to 135.5483 from 136.5701 at the Tuesday US close and 137.3573 at the same time Tuesday morning. Wednesday is a holiday in Japan, so there are no data to be released. The next Bank of Japan monetary policy meeting is scheduled for June 15-16.

USDCAD fell slightly to 1.3623 from 1.3626 at the Tuesday US close but was still ahead of a 1.3570 level at the same time Tuesday morning. There are no Canadian data due Wednesday. The next Bank of Canada meeting is scheduled for June 7.

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