The FOMC meetings are finishing and Bernanke will have his conference at 12:30PM EST. Leading up to it the dollar is weak.
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USD softer against all of its major counterparts except for the British pound. Sentiment is improving today as global equities are broadly higher and yield spreads in Europe continue to ease. US Treasury yields are up with the 10-year yields approaching the pivotal 2.00% and the dollar index is lower as it remains below its daily cloud and Kijun line. Due out shortly at 0830ET are March durable goods orders which are expected to decline by -1.7% from the prior +2.2% on the headline print.
The Federal Open Market Committee (FOMC) concludes its 2-day meeting today and with no change expected on policy, the focus will be on the bank’s updated projections and Chairman 
press conference. With recent commentary from some of the more hawkish Fed officials (i.e. Kocherlakota, Plosser, Bullard) there is scope for the distribution of forecasts for rate increases to be brought forward. While we expect no change in the language of the statement’s pledge to keep rates low through late 2014, markets may react to a significant change in the distribution of the projections.
EUR is trading mixed against G10 currencies – weaker against the commodity block and higher against the rest as sovereign yield spreads ease. The Dutch-German 10-year yield spread which made highs of about 76bps earlier this week has fallen to about 58.8bps currently and the Spanish-German 10-year spread is lower by 9bps to about 403bps at time of writing. ECB Vice President Constancio said the bank’s bond-purchase program “still exists” even though it hasn’t been used in some time and President Draghi reiterated his call for governments to implement fiscal reforms noting that liquidity support is no substitute for fiscal policy. EUR/USD is slightly firmer and facing resistance around the top of a year-long bear channel.
CAD is higher and USD/CAD is testing near the bottom end of its range. The pair sees the 2012 lows around the 0.9840 area and a break below is likely to trigger follow through to the downside. Last night, Bank of Canada Governor Carney maintained his hawkish tone and said that higher rates may become appropriate. Crude oil and equities are currently higher which is supportive of the Loonie. There is little data due out of Canada with the Feb. home price index due at 0900ET and Carney set to speak again at 1515ET.
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So more about the Sterling? Here’s a bit from the Wallstreet Journal:
Sterling fell sharply during European trading hours Wednesday after data showed the U.K. economy back in recession, while the Hungarian forint rose after the European Union said it is prepared to discuss loan assistance for Hungary.
Most major currencies, though, were rangebound in an otherwise quiet session ahead of an eagerly awaited policy statement from the U.S. Federal Reserve.
Sterling sank against both the dollar and the euro after official data revealed the U.K. economy shrank 0.2% on the quarter in the first quarter of 2012 after contracting 0.3% in the final three months of last year.
The poor gross domestic product data put an end to sterling’s recent rally, which had seen the pound trade at its strongest against the dollar since early September and a 20-month high against the euro.
Despite the selloff, some currency traders and strategists remained upbeat about the pound’s prospects, emphasizing that the GDP reading is backward-looking.
Source
What are you thoughts? Is the dollar headed down further?
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