v USD is weaker as the market awaits the release of the FOMC minutes
v EUR little changed after ECB President reiterates the need for fiscal reform
v Commodity Currencies stronger as risk on environment is renewed
The US dollar weakened against most major currencies as market participants remain risk conscious ahead of today's FOMC meeting. Following the FOMC rate decision at 12:30pm EST, economic projections and Fed Chairman Ben Bernanke's press conference is scheduled. The market will likely remain focused on any changes to the statement on inflation, employment, growth, and comments regarding the Fed's low rate pledge. It is expected that Bernanke will remain cautious on the economic outlook given the high levels of unemployment and fiscal uncertainties. Further concerning investors today, we see durable goods orders decline 4.2% in March from the previous gain of 2.2%. Unless FOMC participants push forward their quarterly projections for tightening of Fed rates, the dollar will likely remain pressured in the near-term.
The EUR held close to yesterday's levels ahead of today's FOMC meeting. In other news, ECB President Draghi's testified to an EU parliamentary committee and reiterated the current policy stance of price stability with an inflation target of 2.0% and reiterated the need for fiscal reform. The market will look towards consumer confidence indicators and German CPI due out tomorrow for further direction into the EUR/USD currency pair.
The GBP weakened 0.3% vs the USD after the release of weaker than expected GDP figures. The UK's GDP declined 0.2% vs expectations of a 0.1% expansion placing the economy in a technical recession. The GDP data will impact the outlook for BOE policymakers potentially calling for renewed easing.
The JPY is flat from yesterday as the market is awaiting key CPI data and BOJ data due out tomorrow. Expectations remain for inflation to come in at 0.4% short of Japan's target of 1%. Look for the BOJ to likely expand its balance sheet with longer term asset purchases between ¥5trn and ¥10trn.
Commodity currencies are stronger against the USD with the CAD leading the way, amid signs of improving sentiment about corporate earnings and the Eurozone debt crisis. Oil is bouncing back strongly, gold has jumped off its $1,636 low, and equity markets held solid with investors returning favor towards commodities. As for the CAD, the key domestic event today will be Bank of Canada Governor Mark Carney discussing the Monetary Policy Report before the Senate Standing Committee on Banking after the market's close. The Loonie's rally was supported by Carney's announcement to the finance committee that the central bank may increase interest rates due to stronger performance of the economy and firmer underlying inflation. AUD/USD is slightly higher amid the risk-on environment despite Australia's slowing pace of inflation which has added pressure on the RBA to trim rates at its upcoming meeting on May 1st. NZD/USD has been rather muted, underperforming in comparison to the other commodity currencies. The RBNZ is expected to keep rates unchanged at 2.5% and is weighed down by the recent slide in dairy prices and slowing Chinese growth.
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This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.