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The USD remained under pressure overnight as the market awaits the end of the FOMC meeting and their rate decision. Traders looked towards yesterday’s release of Chicago PMI and their concern had to do with the fact that the number unexpectedly dropped into contraction territory for the first time in over three years.

This release negated the positive feeling of recent economic data that had raised expectation that the FED might start to cut the amount of QE being executed sooner rather than later.

Before the FOMC makes their announcement, ISM manufacturing data will be released. The number is expected to ease from 51.3 to 51.1. This number will be watched closely and any further drop would certainly add “dollar selling” pressure.

See how to trade the ISM Manufacturing PMI with USD/JPY.

ADP release for January is also expected and this number will also be closely monitored, as many look towards the ADP release as a preview of the non-farm payroll number. ADP employment is projected at 153,000 in April, down from 158,000 in March. Non-Farm payroll and unemployment will be released on Friday. Analysts surveyed expect the unemployment rate to remain at 7.6% and expect to see 148,000 jobs added in April compared with 88,000 jobs in March.

As for this afternoon’s conclusion of the FOMC meeting, no real surprises are expected. There should be no change in policy, and traders will await the accompanying statement which may give some clues as to the direction of the FOMC regarding QE. No change expected here today but the FED should reiterate targets expected in inflation and unemployment that will need to be reached to start slowing the stimulus package.

There has been some talk by former FED economists as to what route the FED should take to wind down the bond buying program. The problem the FED has is that any slowing of the QE program cannot be misinterpreted as the beginning of a “tightening cycle”, which would cause a rise in interest rates that would be premature. According to these economists, the program could be reduced in a three-step program, first reducing bond purchases to $60 billion a month, then a cut to $30 billion and finally a complete halt to the program. By using this plan, they say the FED could gauge how the market digests the cut in bond purchases. No one expects any change in QE to be announced at today’s meeting.

As far as the currencies are concerned, the EUR remained strong overnight, flirting with the 1.3200 level but it has not broken that level yet. CAD, GBP, JPY and AUD all remained strong against the dollar in very quiet range trading overnight. Traders are wary not only of the FED decision later today, but the ECB meeting tomorrow. While may expect the ECB to lower rates by 25 bps to 0.50%, there has been some talk that the ECB might do something else to stimulate the eurozone economy. The comments of ECB President Draghi will be closely monitored as well. He has had an uncanny knack of saying just the right thing to give confidence to traders and strength to the EUR.

As for today’s trading, expect to see the pressure remain on the USD ahead of the end of the FOMC meeting.

More: 4 Scenarios for the ECB.