USD - The USD consolidated in its new lower ranges this morning ahead of today's heavily anticipated Fed announcement. Policymakers are still squarely focused on the lagging jobs market and hope that further central bank asset purchases will provide a much-needed boost in lending at both the corporate and consumer level. However, the potency of a third round of so-called quantitative easing would likely be significantly muted with bond yields already near all-time lows. What QE3 will do is foster investor confidence. This bit of reassurance may go a long way in light of the global economic slowdown, ongoing debt crisis in Europe, and with tax reforms looming at the end of the year. Weekly jobless claims released this morning provide support for further easing with 382K workers filing for unemployment benefits. The number is partially skewed by the lingering impact that Hurricane Isaac had on the Gulf Coast states, but the clear move back towards 400K is alarming. Investors also took note of PPI data, showing a surprising jump higher to 1.7% with the increase directly reflecting higher energy prices. Despite the unexpected increase, the rise in prices likely won't be enough to deter the Fed from stepping in. The consensus forecast for what the Fed's program might look like appears to be for up to $50B in asset purchases per month with the expiry date to coincide with economic performance. If announced today, the dollar could retest the bottom of its recent ranges. However, with such high expectations come significant risks leaving the dollar primed for a sharp rebound should the Fed prove more hawkish than expected.

EUR - The euro consolidated towards the top of its recent ranges overnight ahead of the Fed meeting in the US. Yesterday's German Constitutional Court rejection of all pending injunctions against signing the ESM and fiscal integration treaties has assuaged investor fears, at least for the time being. Further supporting market confidence, Dutch Prime Minister Mark Rutte secured victory overnight, setting him apart as only the second Eurozone official to win his reelection bid since the start of the debt crisis in 2009. Rutte's Dutch Liberal party will also gain a coalition majority without having to rely on the nation's fringe parties, including the Freedom Party whose main platform is the dissolution of the EUR currency bloc. The Dutch vote was the second win for German Chancellor Merkel in as many days. As Merkel's Foreign Minister Westerwelle put it, the results "mark a strengthening of Europe and a weakening of populists and nationalists," a fortunate reversal of the recent trend with Merkel up for reelection in 2013.

GBP - The pound is largely unchanged against its major counterparts this morning as the market awaits the Fed decision. Sterling has found support above the key 1.60 handle vs. the USD however as BoE officials are increasingly outspoken about the limitations of central bank stimulus. This morning, policymaker Ben Broadebent told reporters that the BoE is "limited as inflation is higher than [they'd] expected."

JPY - The yen's recent gains accelerated overnight, pushing to a seven-month best against the USD. With a possible third round of quantitative easing in the US, investors are suspecting that the interest rate yield gap between US and Japanese assets is set to narrow even further. As such, the diminishing opportunity cost of holding yen-denominated assets is providing support. However, with sizeable daily moves lower, Japanese interventionist rhetoric has increased with Vice Finance Minister telling reporters this morning that the recent appreciation has been "obviously speculative."

Commodity Currencies - The commodity linked currencies are mixed this morning with the CAD, MXN and NZD gaining while the AUD and ZAR both fell. The CAD and MXN both neared multi-month highs on growing expectations of further stimulus in the US - the primary destination for both Canadian and Mexican exports. The NZD extended its recent gains overnight after a central bank note suggested that interest rates will stay at 2.5% through December and that the Bank previously discussed a rate hike. Meanwhile the AUD fell back from its overnight highs as investors book recent profits. Similarly, the ZAR rebounded from steep overnight losses despite worsening civil tensions in South African.