Forex Major Currencies Outlook (September 18, 2013)

The Fed is expected to taper bond purchases by $10 billion, possibly as a combination of a reduction in Treasury purchases and in mortgage-backed securities. In addition, market watchers will keep close tabs on the accompanying statement by Bernanke as he is expected to adopt forward guidance and provide clues on future monetary policy moves. Fed estimates on growth and inflation are also set for release along with the rate statement. 

EUR 

The euro struggled to rebound against the dollar in yesterday’s trading but EUR/USD’s movement is slated to stay muted today. German ZEW came in stronger than expected, allowing the region’s ZEW figure to land above the 50.0 mark. There are no reports due from the euro zone, as EUR/USD traders will probably position themselves ahead of the FOMC statement. 

GBP 

The pound sold off slightly yesterday, as inflation reports simply came in line with consensus. Annual CPI is at 2.7%, down from the previous 2.8%, and closer to the BOE’s 2% inflation target. Core inflation showed a more subdued figure while producer price inflation hinted at lower price pressures in the future. BOE meeting minutes are up for release today and it will be interesting to see if policymakers pushed for an earlier end to easing or not. 

CHF 

The franc was vulnerable to dollar and euro behavior yesterday as there were no releases from Switzerland. The schedule is still empty again for today, which means that the franc could be sensitive to market sentiment. In particular, watch out for the FOMC statement if you’re trading USD/CHF. 

JPY 

The yen edged lower against its counterparts as risk appetite improved and there were no reports released from Japan. US TIC long-term purchases data showed that Japanese investors bought a lot of US bonds in the previous month, which reflected strong demand for the dollar and weak demand for the yen. The schedule is empty for today, which suggests that USD/JPY could be driven by the FOMC decision. 

Commodity Currencies (AUD, NZD, CAD) 

The comdolls tried their best to bounce back against the dollar yesterday, pushing AUD/USD back above .9300 and NZD/USD way past .8200. USD/CAD held steady above the 1.0300 major psychological support. New Zealand is set to print its GDP after the FOMC statement and possibly show weaker growth of 0.2% compared to the previous quarter’s 0.3%. BOC Governor Poloz is set to give a testimony today and possibly spur volatility for USD/CAD ahead of the FOMC. 

By Kate Curtis from Trader's Way