The US dollar has weakened of late, moving down on disappointing US data, but that isn’t necessarily the only reason.
BTMU asks if a dovish FOMC is already priced in, and provides an answer regarding EUR/USD:
Here is their view, courtesy of eFXnews:
Given how calm the financial markets remain, it is clear that the key part of this evening’s FOMC announcement is not the confirmation that QE3 has been completed but that we remain some “considerable time” away from the first rate increase, says Bank of Tokyo-Mitsubishi (BTMU).
“That phrase along with the “significant” under-utilisation of labour resources are both set to remain in the statement – a view that has certainly helped restore calm to the financial markets,” BTMU adds.
“…For today, the FOMC will be focused on delivering the end of QE3 without any financial market fuss and to ensure that we should all expect a dovish statement,” BTMU argues.
“EUR/USD can probably continue to edge higher from here but a dovish statement is well in market prices, so we don’t expect any major dollar move,” BTMU projects.
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