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USD:   The statement is released at 18:00 GMT. If the Fed does reduce amount of monthly asset purchases, this would be initially dollar positive, but equity market reaction could cause volatility afterwards.   More likely would be subtle changed to the statement.

Preview:  A mild hawkish change? 4 scenarios for the Fed decision

GBP:  Focus on minutes to June MPC meeting. Three members have voted for more QE for past four months.   Fall in this number would be marginally sterling positive.   Key speeches by both Chancellor and out-going Bank of England governor this evening. Small risk event for sterling, but worth watching nonetheless.

NZD: Trade balance data released 22:45 GMT.

Idea of the Day

The day of reckoning has arrived. For the past six weeks, the dollar has been obsessing about the likelihood of the Federal Reserve ‘tapering’ the amount of bonds it buys on a monthly basis. This first pushed the dollar higher during May and then sent it lower during the current month. Whilst the economy may be in a better position, the labour market is still a weak point in the recovery and beyond yesterday’s decline in the headline rate, inflation has been falling.   As always, the Fed needs to balance the risks of moving too early and having to backtrack against the risks to inflation and asset markets of maintaining bond buying for too long.   Furthermore, they want to be as clear as a central bank can be in steering markets, so some adjustment of the statement is likely today, possibly to reflect the growing feeling on the committee that some believe purchases should be tapered and an indication of what would likely cause a change here.

Latest FX News

JPY:   The trade data was better than expected, recording a smaller surplus than anticipated at JPY 993 bln in May.   USDJPY modestly weaker overnight and holding above the 95.00 level during Asia trade.

EUR:  Finding buying interest during the week and allowing a push above the 1.34 level, not seen on a closing basis since 13th Feb of this year.

GBP:   Sterling has been quietly doing well through most of the month to date, supported by better data and reduced expectations of more quantitative easing near-term.   Has been battling with 200-day moving average for past 5 sessions (currently 1.5694).

AUD: Struggling a little so far this week, showing that the potential for corrective activity from oversold levels is fairly low. After RBA minutes earlier in the week, there is a growing feeling that the central bank is happy to see the Aussie lower for the time being.