During European trading the EUR/USD pairing maintained a fairly subdued relationship.
Although risk sentiment improved overnight thanks to developments in Turkey, the ‘Greenback’ continued to receive underlying support from expectations surrounding the conclusion of the two-day Federal Open Market Committee meeting in the US.
Furthermore, the calm which returned to the market after Turkey’s decision was soon ruffled.
As one London-based currency strategist observed; ‘There was a sense that Turkey, by hiking interest rates, had resolved the Lira pressure and by extension would provide comfort to other emerging markets. But now the market is a little twitchy and there are still some grounds to be nervous regarding emerging markets, which is creating volatility’.
The EUR/USD pairing was also comparatively unaffected by German consumer confidence data, which showed an improvement in sentiment at the start of the year.
Of course the big US news could have far reaching consequences, and today’s Euro to US Dollar exchange rate forecast is for potentially significant EUR/USD movement.
So what aspects of the FOMC statement should we be focusing on? Well, as it will be Ben Bernanke’s last policy meeting before pro-stimulus Janet Yellen takes the reins it wouldn’t be surprising if Bernanke decided to comment on the direction he believes the central bank should take.
Although he isn’t scheduled to give a press conference, any comments he does issue will be of particular interest.
It is expected that the Fed will opt to reduce the level of asset purchases by 10 billion Dollars each month over the next six meetings, with a view to ending the programme by the end of the year.
The unemployment threshold is also forecast to stay at 6.5 per cent – despite the unemployment rate unexpectedly sliding to 6.7 per cent last month.
In fact, economists are expecting today’s policy announcement to be very similar to the one delivered in December – even given the patchy nature of the US data published in recent weeks.
If accurate the US Dollar can be expected to experience modest but widespread gains, driving the Euro lower.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8256 ,
Euro,,New Zealand Dollar,1.6496,
Euro,,Canadian Dollar,1.5261 ,