Waiting On The FOMC

Market Brief

The Usd was weaker in Asian session, as risk sentiment firmed on the back of the massive Wall Street surge. The EurUsd traded up to 1.2839 from 1.2471, while the UsdJpy moved higher on the open to 99.70, before slipping down to 96.09. Commodity currencies found buyers, with the AudUsd trading higher to 0.6532. The UsdNok fell to 6.6860, as crude prices rallied. Carry trades seem to have found a base and with easing risk aversion is regaining ground. The story today is Wall Street buying euphoria, with S&P up 10.78% (despite consumer confidence hitting a record low of 38.0). However, the jubilation failed to carry over into Asia, with a majority of the regional markets trading lower (Nikkei 7.74% as rumors of a BoJ 25bp rate cut circulate ). European futures are point to a higher open, as a VW new exalted status has breathed new life into the continents equity markets. The prospects of central banks easing interest rates, starting with today today's FOMC announcement, has been the core driver to price action as the effects carry over into the equity markets. Should we see another strong day in stocks, watch for the G10 to continue to rally against the Usd & Jpy.

Markets will be keeping their power dry for the Fed decision slated for 18.15gmt today. The market is expecting a 50bp cut, but, more importantly, the Fed has signaled that 1.00% is not necessarily the floor and additional cut are on the table. We expect the accompannying statement to stick a similar note to that release, with the coordinated interbank rate cut. It should highlight the fact that the financial crisis will likely restrain growth and the upside risk to inflation has decreased (as commodity prices have eased and prospects of a global slowdown).

For the Norges Bank policy decision today, we are in line with consensus and expect a 25bp cut. While inflation continued to run above the central banks comfort level, the downside risk to growth has moved to the forefront of concerns. The move should help the stability of the financial market and provide much needed liquidity.

Daily Forex Fundamentals | Written by AC-Markets | Oct 29 08 09:13 GMT |