Today's focus of US FOMC statement

United States Dollar:

GBP/USD - The dollar was softer on Tuesday, as weaker than expected US durable goods orders pushed expectations of the US Federal Reserve raising interest rates further into the future. With no UK data releases cable spent the morning trading a relatively tight quarter of a cent range, between 1.61 and 1.6125. The start of the afternoon saw US durable goods orders fall for a second month in a row. September’s orders were predicted to show an improvement to 0.6% from the previous reading of -18.4%, but the actual number contracted again to -1.3%. The news saw sterling gain nearly 0.75 cents, hitting 1.6178 at its peak before a rise in US consumer confidence to pre-crisis levels had the pair fall to hold above 1.6155 for the rest of the afternoon. As UK trading ended however, comments from the Bank of England's deputy governor, Sir Jon Cunliffe, erased some of sterling's gains. Speaking in Cambridge, Cunliffe stated that, "the softening in the pay and inflation data, together with the weaker external environment, for me implies that we can afford to maintain the current degree of monetary stimulus for a longer period than previously thought," he then went on to say, "there are grounds to wait for clearer signs in wage growth before raising rates”. These dovish comments sent GBP/USD lower before finding support around the 1.6130 level. We now look to today's FOMC statement to see if the Fed reiterates it’s stance of holding rates low for a "“considerable time”. We open today with GBP/USD at 1.6135.

Euro:

GBP/EUR was range bound through UK and European trading, but lost ground following dovish comments from Bank of England Deputy Governor Cunliffe. With little direction from UK data, and only minor releases from Europe, the pair hopped back and forth between 1.2680 and 1.2795 before falling to just below 1.2660 as Cunliffe stated he sees the bank maintaining the current level of monetary stimulus for longer than previously. Low pay and inflation, combined with the decline in global growth forecast, means the banks should remain cautious. Obviously, this dampens expectations of a UK interest rate rise for at least the next 6 months. This morning’s trading starts with minor news from Europe as French consumer confidence and Spanish retails figures are released. The UK then posts its mortgage approvals, consumer credit and net lending to Individuals for September, while this afternoon’s trading is likely to be fuelled by risk sentiment follow the FOMC statement. We open today with GBP/EUR at 1.2665.

EUR/USD - The euro posted decent gains against its US counterpart as the fall in US durable goods orders for the second month in a row damped the dollar’s position. As mentioned above, September’s orders were predicted to increase by 0.5% however a decline to -1.3% saw the single currency jump to 1.2750. A short while later US consumer confidence posted a reading of 94.5 vs 87.0 exp, its highest since before the economic crisis and the pair fell slightly to 1.2738. Today, we expect the US Federal reserve to confirm an end to its asset purchasing facility and reaffirm its dovish stance to a US interest rate rise. We open today with EUR/USD at 1.2740.
EUR/USD also traded up by the end of last week, as disappointing US home sales numbers helped the pair climb from an opening price of 1.2640 to above 1.2680. As mentioned above, the news that the EBA and ECB stress test results are not as bad as first thought has seen the pair gap higher overnight, so we open today with EUR/USD at 1.2685. It is likely this week will be a volatile one for EUR/USD, with the Fed announcement of its MPC minutes along with the potential end to its QE program and the eurozone / Germany post CPI and unemployment rates. In addition, US durable goods orders, GDP and consumer confidence surveys are also released.

Aussie and Kiwi Dollars:

Both the Aussie and Kiwi dollars have advanced against their UK and US counterparts yesterday. The fall in US durable goods orders, and dovish comments from the Bank of England Deputy Governor, have helped the commodity linked AUD and NZD to rise to 0.8875 & 0.7940 respectively against USD, and 1.8175 & 2.0320 respectively against GBP. The NZ dollar also gained a further boost from improved ANZ activity outlook and business confidence numbers overnight. With the RBNZ expected to announce that interest rates will be kept at present levels, it is likely any volatility will be fuelled by changes in risk sentiment following this afternoon’s US Fed MPC statement. We open with GBP/AUD at 1.8240 and GBP/NZD at 2.04.

Data releases for the next 24 hours:

AUD: Export Price Index (QoQ) (Q3), Import Price Index (QoQ) (Q3), HIA New Home Sales (MoM) (Sep)

EUR: No Data

GBP: Consumer Credit (Sep), M4 Money Supply (YoY & MoM) (Sep), Mortgage Approvals (Sep), Net Lending to Individuals (MoM) (Sep)

NZD: ANZ RBNZ Interest Rate Decision

USD: MBA Mortgage Applications (Oct 24) Fed Interest Rate Decision, Fed pace of MBS & Treasury Purchase Program, Fed's Monetary Policy Statement