EUR/USD: The pair traded sideways for much of the session

EUR/USD

The pair traded sideways for much of the session, as markets tentatively waited the release of the Fed rate decision after the close. Initially the pair had found some reprieve with talk of month end buying in EUR/GBP from a large European central bank. However, heading into the close this abated as markets positioned for a dovish Fed, with the USD weakening and the pair moving to print fresh highs at 1.2770. Looking ahead focus for the pair remains firmly on the FOMC rate decision, at which market participants expect a dovish tone and analysts suggest the Fed will taper and announce the end of QE3.

GBP/USD

Despite reaching session highs early in European trade, at 1.6154, the CBI August-October growth indicatornumber (19 vs. 23 in July-September) and overnight comments from BoE's Cunliffe who suggested that BoE can keep stimulus longer than previously thought weighed on the pair through the session. Little fundamental news flow led GBP/USD to reach session lows at 1.6104, with further downside momentum found in a weak UK mortgage approvals number (61.3K vs. Exp. 62.0K). This low proved to be the floor for the pair, which then subsequently found fresh strength into the close on little fundamental newsflow. The pair has risen heading into the close, with market tentatively awaiting the FOMC rate decision later in the day.

USD/JPY

With the seminal FOMC rate decision later this evening the pair has returned to its European session opening levels around 108.15, after falling at one point to 107.94, amid little fundamental news and focus remaining firmly squared upon the Fed monetary policy event. With little to guide the price action today looking ahead the US rate decision is likely to be the key event for the pair and attention will be paid to the wording used by US rate setters.If the Fed retain a “considerable period” and taper QE, all focus will be on the accompanying statement and how the Fed view the direction of economic growth in the short-term. If the Fed surprise markets and drop the phrase “considerable time” from the statement, then this will likely cause aggressive strengthening of the USD. Notably,however, despite the majority of analysts expecting a conclusion to QE3, some have suggested that recent conditions warrant further stimulus, and volatility in equity markets is likely to support the argument of more dovish members on the FOMC to provide liquidity to the system for longer.