Forex News and Events:
-----------------------------
Wednesday saw a lackluster day’s trading as the market awaited the FOMC interest decision. Equities rose on the potential establishment of a ‘bad bank’ in the US to purchase toxic assets.
For most of the day USD/JPY traded around the 89.50 area where there were a couple of large expiries while EUR/USD ebbed and flowed with talk of Middle Eastern buying countering Eastern European and Asian selling.
The FOMC did, as expected, leave interest rates unchanged at the zero to 0.25% ‘target range’. However, the statement seemed to disappoint the market somewhat. It did not paint a bright picture of economic conditions and noted how the fall in global demand will affect the US adversely. The committee also said they expected a gradual recovery to start later this year but that there is significant downside risks to that scenario. This is hardly showing a level of confidence. The statement also mentions inflation, or rather the lack of it, and, without mentioning the word ’deflation’, said that ‘inflation could persist for a time below rates that best foster economic growth and price stability in the longer term’.At the end of the day, this seems to have left the market as uncertain as it was before.
Asia was quiet despite the news that Obama’s $800 billion stimulus package was passed by the House. To be fair the Dollar has raised a touch but, overall, there has been little reaction to report on.EUR/USD and GBP/USD have both been under steady pressure for the entire Asian session. EUR/USD eventually triggered stops just below 1.3100 while GBP/USD did the same at 1.4150. USD/JPY made temporary gains to 90.65 but soon fell away thanks to Japanese sales of EUR/JPY which saw USD/JPY move down to 89.70.
In the US, durable goods orders is expected to show another substantial decline (consensus:-1.8%, January: -1.5%) in December after the new orders index in the manufacturing ISM report plunged to the lowest level since 1948. Both ex transportation and ex defense indices are expected to have dropped severely, by -2.7% and -2.1% respectively. Initial jobless claims should remain elevated at 575K for the week ended Jan 24 while 4-wweek average is expected to have risen to 540 after noticeable fall to 519 in the previous 2 weeks.
