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* Dollar creeps up ahead of Fed decision
* Fed expected to keep rates on hold
* Euro not lifted by strong GDP data
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, May 3 The dollar inched up against most
major currencies on Wednesday, as investors eyed a U.S. Federal
Reserve statement later in the day for guidance on whether bets
for a June interest rate hike are justified.
The Fed is widely expected to keep interest rates unchanged
at the end of its two-day policy meeting on Wednesday, but
investors will be looking to see whether the central bank
downplays the recent soft patch in the economy to leave the door
open for a move next month.
A June hike is currently 65 percent priced in by markets,
according to Reuters data.
The dollar index, which measures the greenback against six
major currencies but the majority of whose weighting is against
the euro, edged up 0.2 percent to 99.094, close to a
5-1/2-month low of 98.695 hit last week.
Data showing the euro zone economy started the year with
robust growth that far outstripped that of the United States had
little effect on the euro, with analysts saying that the single
currency - which hit its highest levels since early November
last week - already had a lot of good news priced into it.
The euro edged down 0.2 percent against the broadly stronger
dollar to $1.0911, close to last week's peak of $1.09515.
"The ECB (European Central Bank) may be talking about policy
normalization, but at the end of the day they’re still easing;
they’re still expanding the balance sheet," said Barclays
currency strategist Hamish Pepper, in London.
"That’s where some of this hawkish rhetoric that's emerging
around the ECB, and bullish rhetoric around the euro, will
really be tested in the second half of this year," he added,
saying that the euro would struggle to rise much further above
While the ECB continues to pump tens of billions of euros
into the euro zone economy each month, the Fed has raised
interest rates twice in the past six months and is expected to
hike them twice more by the end of the year.
But weak U.S. April auto sales data released on Tuesday
added to recent worries about the outlook for the U.S. economy,
which grew at its slowest rate in three years in the first
quarter of the year.
"If you look at how markets are positioned right now, it
feels like hoping for the best but psychologically braced for a
not so positive message (from the Fed)," said UBS Wealth
Management analyst Geoffrey Yu, in London.
"The data of late probably hasn’t been enough to justify any
excess buoyancy or excess bullishness (but) given the experience
of March, when no one thought it was a live meeting and then the
Fed turned it into a live meeting, I don’t think anyone would
make that mistake again."
Against the yen, the dollar was up 0.2 percent at 112.22,
close to a six-week high of 112.33 yen set on Tuesday.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Masayuki Kitano in Singapore; Editing
by Andrew Heavens)