The US dollar remained under pressure this morning after the release of the ISM Non-manufacturing index which came in at 50.6 just below expectations and ahead of this morning's policy decision from the Federal Reserve which is due out at 11:15am PST. Analysts are looking for a potential change to the Fed's language which previously indicated that rates would remain low for an extended period.
Look for the dollar to remain under pressure and potentially sell off if there is no change to the language in the Fed's accompanying statement. The market will also turn its attention to the all important Non-Farm payrolls release on Friday, where it is expected that the US only lost 175,000 last month versus 263,000 in the previous month.
The euro pushed higher with a survey released showing a bigger-than-expected expansion in the euro zone, but the single currency pared some of its gains after the Fitch ratings agency downgraded Ireland's sovereign rating to 'AA-' from 'AA+.' Analysts will look towards tomorrows European Central Bank announcement where it is expected that rates will remain unchanged at 0.5 percent.
Sterling rose after data showed a higher-than-expected increase in UK service sector activity, rising to 56.9 from 55.3 in October. Analysts will look towards the Bank of England's policy decision tomorrow where it is expected that they will increase their 175 billion pound asset-purchasing plan by 25-50 billion pounds.
The Japanese yen weakened against the dollar overnight, but regained some of its footing on higher equity moves in US trading. In other news, Bank of Japan Governor Shirakawa spoke to parliament today and highlighted that they do not have an optimistic outlook and that they plan to keep interest rates low for some time.
The Canadian dollar rose to its highest level in more than a week against the U.S. dollar as oil pushed above $80 a barrel along with gold prices climbing to a record high above $1,095 an ounce. Look for the loonie to remain well supported ahead of Canadian employment data due out on Friday, where it is expected to show the economy added 10,000 jobs in October.
The Australian dollar recovered from its lows yesterday as investors jumped back into the market to buy after the sharp drop. Despite Wednesday's weak retail sales report lowering the chance of an interest rate rise in December the demand for Aussie remained. With the Reserve Bank of Australia rate hike yesterday by 25 basis points to 3.50 percent and the momentum of commodity prices, look for the Aussie to continue to push higher.
The New Zealand dollar followed its Aussie counterpart holding its ground despite data showing the New Zealand government posting a deficit of NZ$2 billion ($1.45 billion) for the first three months of the fiscal year to Sept. 30. The market will look towards third-quarter jobs data due out tomorrow.
10-Year Treasury Note Yield: 3.507%
Dow Jones Industrial Average: 9,893.35 +120.46