USD increased on Fed minutes, ECB cut rates

The USD traded high against the major currencies on Wednesday as the Federal Reserve announced a decision to scale back its monthly asset purchases in a few months, amid reports the European Central Bank is considering negative interest rates which also increased the demand for the USD.

The Fed minutes read: “During this general discussion of policy strategy and tactics, participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months”.

The ECB had unexpectedly cut rates to a record low 0.25% earlier this month amid concerns over mounting deflationary pressures in the Eurozone.

In U.S. trading on Wednesday, EUR/USD dropped 0.82% to 1.3427.

The National Association of Realtors reported earlier that existing home sales dropped 3.2% to a seasonally adjusted 5.12 million units in October from 5.29 million in September.

The U.S. Commerce Department reported earlier that retail sales increased 0.4% in October, high above expectations for a 0.1% gain after coming in flat the month earlier.

The data resulted in optimism that the consumer-driven U.S. economy is on the mend and may keep the Federal Reserve on track to scale back stimulus measures in early 2014.

U.S. Department of Labor reported the country’s consumer price index dropped by a seasonally adjusted 0.1% in October, in contrast to investors’ forecast of a 0.1% increase.

The USD was up against the British Pound, with GBP/USD decreasing 0.12% at 1.6100.

The USD was down against the Japanese Yen, with USD/JPY down 0.15% at 99.99, and up against the Swiss Franc, with USD/CHF up 0.68% at 0.9172.

The USD traded mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD losing 0.21% at 1.0448, AUD/USD losing 1.09% at 0.9332 and NZD/USD losing 1.33% at 0.8262.

The Australian USD came under pressure after Reserve Bank of Australia Assistant Governor Guy Debelle announced on Wednesday that the bank would prefer the exchange rate to be lower.

The USD index was up 0.50% at 81.11.

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