By Cornelius Luca, BridgeNews
New York--Feb. 27
The greenback drifted down on position squaring amid ongoing talk that the Federal Reserve will cut interest rates inter-meeting to shore up the decline of the U.S. economy and the flagging domestic equity markets. The Fed might act as early as Tuesday if the Conference Board's February consumer confidence report provides additional evidence of economic weakness. Traders took limited risks, holding the major pairs within recent ranges.
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The dollar's pullback versus the euro, yen and Swiss franc never left either Monday's or Friday's respective perimeters, emphasizing market's risk aversion. Sterling/dollar actually declined, but remained within Monday's range. Profit taking helped dollar/Canada reverse losses after dipping to a 12-day low of 1.5267 on ongoing sales since the previous session.
The U.S. traders will focus on the Conference Board's February consumer confidence report, a favorite indicator for the Federal Reserve Chairman Alan Greenspan, which is seen retreating to 110.3 in February from January's 114.4.
Dallas Federal Reserve Bank President Robert McTeer gave a hint that the Fed might trim interest rates inter-meeting by saying Monday night that the Fed could cut rates more if needed. In addition, Bear Stearns upped on Monday its Federal Reserve forecast to an 80% probability of a rate cut this week from a 60% chance it had forecast Friday.
Also on the daily schedule there is durable goods orders, which are expected to fall 2.8% in January from December's +2.2%.
Key levels are 116.85 and 115.50 Gann pivot points for dollar/yen and 0.9015 and 0.9240 for euro/dollar.