USD - The dollar is evenly mixed this morning against its major counterparts as investors anxiously await a key Fed decision. In light of the recent string of disappointing economic data, investors are expecting further monetary easing from the FOMC when they conclude their two-day meeting at 9:30am PST. However, with the Fed's benchmark rate already near 0%, the question is what the Fed can do to further defend their dual mandate of encouraging maximum employment and controlling inflationary pressures. The most likely result will be an extension of Operation Twist in which the Fed has swapped $400B worth of short-term bonds for longer maturities. The current program is set to expire at the end of the month. However, the effectiveness of Twist has been questionable with interested home buyers still unable to secure financing unless they have near-perfect credit. The Fed could also revise its interest rate forecast. However, with the current outlook being for rates to stay exceptionally low through the end of 2014, the effects of pushing that out another 12 or 18 months may be limited. Finally, policymakers could unveil a third round of quantitative easing in which the Fed would purchase more Treasuries. While QE1 and 2 did push interest rates lower, it hasn't solved the labor market woes with banks still reticent to lend out their money. Whatever path they decide to take, extensive further action from the Fed will likely weigh on the dollar in the near term. However, the US economy's continued outperformance as compared with its peers and the ongoing debt crisis in Europe will likely keep the dollar supported in the longer term.

EUR - The euro consolidated in its recent ranges overnight as investors await the Fed's latest policy decision. The common currency has also found support as The New Democracy, Pasok, and Democratic Left parties formed a coalition, swearing in Antonis Samaras as Greece's new prime minister. Samaras and his new Finance Minister, former National Bank of Greece chairman Vasilios Rapanos, are now faced with the unenviable task of identifying €11.6B or more of fresh austerity measures to appease Greece's creditors after weeks of political gridlock derailed fiscal consolidation plans. Meanwhile, with a clear mandate secured after his party swept to a majority control of the French parliament, President Hollande has urged his German counterparts to consider using the ESM to buy debt from struggling Eurozone nations like Italy and Spain. Initial reports are that Germany opposes the notion, but rising Spanish and Italian debt yields may force Chancellor Merkel and her administration to capitulate before long.

GBP - Sterling is relatively flat as increased expectations of further easing from the BoE are actually providing support. Data released this morning showed that policymakers voted 5 to 4 at the BoE's last meeting to keep policies unchanged, but it appears the case for further asset purchases is growing.

JPY - The yen was the worst performing currency against the dollar overnight, paring initial gains. The move higher came after Japan's Upper House approved the appointment of the more dovish nominees Kuichi and Sato to the BoJ. However, with the Bank's next meeting not until the middle of July, the yen will likely remain within its recent ranges in the near term.

Commodity Currencies - The commodity linked currencies are marginally higher this morning even as stocks and commodities both slip into the red. Oil fell to $82.50/bbl, gold declined to $1598, and copper was down to $341.lb. The CAD pared initial gains as the price of oil, Canada's primary export, declined. However, the loonie's fall has been limited by expectations of further stimulus out of the US - Canada's main trading partner - as further support will likely strengthen demand for Canadian goods. Meanwhile, both the AUD and NZD remain well supported towards the top of their recent ranges. Australia's AAA credit rating is increasingly drawing investor demand with the government able to sell securities paying out the lowest yields on record with a recent debt auction oversubscribed three to one. Even with the surging demand, the 3.13% yield on a 10-Yr Australian note is still 104bps higher than the second-best AAA rated Netherlands.