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Previewing the FOMC’s November policy meeting, “we expect the Fed to make the QE program more accommodative by increasing the average maturity of purchases, but not yet,” said TD Securities analysts.

Key quotes

“Fed officials have been emphasizing that the economy is still far from recovered, and risks are tilted to the downside, but the official data have continued to surprise on the upside side thus far. Against that backdrop, we don’t expect any new policy announcements at next week’s FOMC meeting, and changes to the wording of the statement are likely to be minimal, but potential changes to the QE program and associated guidance will likely be discussed.”

“FX markets are more likely to be concerned with the aftermath of the US election than the Fed. FX vols in across the G7 suggest the market is expecting some kind of election risk premia/uncertainty to persist well beyond November 3rd.”

“We think there is a greater risk of another residual USD short squeeze ahead of the key events. 1.1600/10 in EURUSD, 121.00/15 in EURJPY and 104 in USDJPY are the key lines in the stands we are watching to trigger possible USD extension risk.”