A bout of USD strength ahead of the European close sees GBP/USD pare much of its gains

Today has seen FX markets trade generally in a relatively tight range ahead of the key risk event of the week in the Fed rate decision. While few expect a rate hike, participants will be looking closely for any clues from the FOMC as to whether a September rate hike is on the table. Away from the USD, GBP has been the notable outperformer for most of the European session, with GBP/USD posting a four week high as some desks attribute the move to support from M&A related flow such as the purchase of Quintain Estates & Development by Lone Star Funds, as well as Zurich Insurance's potential offer for RSA. However, heading into the European close GBP has paired much of its gains from the day amid an uptick in the USD, with the greenback seeing a late bout of strength.

Elsewhere today, we have seen commodity currencies strengthen on the back of the lower drawdown than expected in today’s DoE crude oil Inventories, which printed a headline figure of -4203K vs Exp. +850K, with crude output falling by 1.517% to 9.413mln bpd. This saw a rebound in both WTI and Brent to see the former break above USD 48 handle and the latter to trade around USD 54.00. As a consequence, the likes of RUB, NOK and CAD all went on to trade at their highs of the day. Of note for the RUB, the Russian Central Bank rate decision is set for Friday, with the central bank expected to cut their key rate by 50bps, with some analysts forecasting as much as a 100bps cut.

After tonight’s Fed rate decision, tomorrows notable highlights include comments from RBA Governor Stevens, German unemployment and regional and national CPI, as well as a host of tier 1 data out of the US including US GDP advance reading, Core PCE and weekly jobless claims.