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    European Session – Euro under pressure as market awaits Fed decision

    The market was mostly waiting the crucial statement out of the Federal Reserve later, as the dollar pushed the euro back towards 1.10 at around 1.1040, but lost ground against the pound as it powered ahead towards 1.57 at 1.5680.  The moves appeared to be mostly connected to flows rather than specific market-moving news.

    Stabilization in Chinese stock markets earlier in the day restored some sense of calm in global financial markets, as US stocks also managed to open higher after the previous day’s hefty gains.  Commodity markets were still under pressure however, which tended to weigh on commodity currencies such as the aussie and the loonie.

    In the only significant macroeconomic news of the day prior to the Fed statement, US pending home sales dropped 1.8% during June, instead of rising 0.9% as expected by economists.  The news did not have much of an impact on the US dollar.

    The Fed’s statement was eagerly awaited as any changes to its content could signal that the Federal Reserve is ready to hike interest rates during its next meeting in September.  A move was not expected today, as the Fed would probably like to have more data, its updated forecasts and a chance to explain a move at a press conference.  Today’s meeting does not feature a press conference or updated forecasts.  If the Fed stresses that the September decision will be data-dependent, this could lead to additional dollar volatility around data announcements.

    Following the all-important Fed statement, during tomorrow’s Asian session Japanese industrial production for June will be closely watched followed by Australian building permits for the same month.

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