European Session – Dollar under 120.00 yen ahead of FOMC minutes

The market’s main focus is on the FOMC minutes later tonight, leading to dollar weakness and a reversal of Tuesday’s gains during the European session.

Despite broad dollar weakness, the euro was unable to resurface above 1.0900 even though Eurozone retail sales data were in line with expectations. The figures showed a lower reading in February, dropping 0.2% on a month-on-month basis, versus January’s 1.1% rise. On a year-over-year basis, retail sales rose 3.0% also in line with forecasts. Other data on German industrial orders disappointed with a drop of 0.9% in February but not as bad as January’s 3.9% fall m/m. The euro hit a European Session high of 1.0886 but held above 1.0834 and is expected to remain steady as the dollar is under pressure ahead of the FOMC minutes.

Sterling outperformed against the dollar to rise to a high of 1.4971, up from the day’s low of 1.4804. The weaker greenback helped buoy the pound, although further gains are expected to be limited ahead of UK election uncertainty.

The dollar slid against the yen to 119.63 after falling back below the key 120.00 yen level in Asia today to erase yesterday’s gains. Two factors are weighing on the pair: one is the fact that the yen received a boost after the Bank of Japan left monetary policy unchanged today and the other is positioning ahead of a key risk event, the FOMC minutes.

In the latest US central bank’s monetary policy meeting on March 18, the word “patient” was removed from the Fed’s statement in regards to interest rates so investors will closely watch the minutes today for any clues as to the timing of the first rate hike. A slightly dovish tone in the minutes would be negative for the dollar.