Markets cautious ahead of tomorrow's FOMC statement

United States Dollar:

GBP/USD - After the turbulence of last week, cable experience a relatively quiet day of trading as sterling remained well supported. With no data releases from the UK the pair traded a tight 20 pip range through the morning session, but then gained as US service PMI and pending home sales came in below expectations. Market service PMI posted a reading of 57.3 vs 58 exp, while MoM pending home sales for September came in at 0.3% vs 0.5% exp. The news helped Sterling remaining above 1.6125 for much of the afternoon, hitting a high of 1.6140 for the day. Today we again have no data due from the UK, however the key releases of US durable goods orders and consumer confidence should provide a good side show ahead of tomorrow's Fed MPC statement and asset purchasing facility. Markets are expecting confirmation that the facility comes to an end this month, so any deviation will most certainly fuel strong volatility. We open today with GBP/USD at 1.6095.

Euro:

GBP/EUR also traded a relatively tight range through all of yesterday’s sessions. The day opened with sterling holding around 1.27 against the single currency and soon found further support as German IFO surveys disappointed. The surveys, regarded as an early indicator of current conditions and business expectations in Germany, all printed readings below predicted levels with expectation at 98.3 vs 98.9 exp, Business Climate at 103.2 vs 104.3 exp and current assessment at 108.4 vs 110. The numbers saw GBP/EUR gain a little further, tipping 1.2712 at its peak, and then retreat below 1.27 over the afternoon. With a lack of data from both Europe and the UK, today will most likely remain quiet for GBP/EUR. However, changes in risk appetite following the US releases could provide a little volatility. We open today with GBP/EUR at 1.2685.

EUR/USD initially lost ground through the morning, following German IFO surveys but then rallied as US data came in below expectations. Starting the day at 1.2685, the pair dropped to 1.2667 after the IFO news and then rose to above 1.2715 as US service PMI, pending home sales and the Dallas Fed's manufacturing business index all disappointed. Today sees only minor data released from Europe, but this afternoon’s US durable goods orders and consumer confidence reading should prove interesting. With last month's reading of -18.4%, durable goods are expected to show a marked improvement to 0.6%. Attention will then shift to tomorrow’s FOMC Statement and whether or not the Fed ends its quantitative easing program. We open today EUR/USD at 1.2685.

Aussie and Kiwi Dollars:

AUD and NZD have both advanced against their US counterpart, as weaker than expected US data saw AUD/USD and NZD/USD trade highs of 0.8826 and 0.7904 respectively. With no UK or Australian data, and with the NZ Labour Day bank holiday, the commodity link currencies have traded relatively tight ranges against sterling. GBP/AUD moved a little higher, hitting 1.8340, while GBP/NZD has fallen, hitting a low of 2.0410. Again data is thin on the ground, so investors will be looking towards the US releases for direction. We open with GBP/AUD at 1.8240 and GBP/NZD at 2.04.

Data releases for the next 24 hours:

AUD: No Data

EUR: German Import Price Index (YoY & MoM) (Sep), Dutch Consumer Spending Volume (Aug), Italian Business Confidence (Oct)

GBP: No Data

NZD: ANZ Activity Outlook (Oct), ANZ Business Confidence (Oct)

USD: Durable Goods Orders (Sep), Durable Goods orders ex Transportation (Sep), Redbook Index (YoY & MoM) (Oct 24), S&P Case-Shiller Home Price Indices (YoY) (Aug), Consumer Confidence (Oct), Richmond Fed Manufacturing Index (Oct)