USD - The USD consolidated in its recent ranges overnight as investors remain sidelined ahead of the latest Fed decision due at 11:15AM PST. As such, global financial markets are highly volatile as investors weigh the prospects of further quantitative easing. Data released this morning further supports Fed action with private payrolls falling to +163k versus +172k in June. The measure did however come in better than expected, beating the consensus forecast for a reading of +120k Meanwhile, ISM manufacturing contracted for the second month in a row with the index coming in at 49.8, short of the 50.2 that was anticipated with a reading below 50 signifying contraction. However, with the ECB stealing the spotlight on Thursday with a much-anticipated meeting of their own, the Fed may leave their current policies on hold for the time being while possibly changing the language in their forward-looking statement to make room for further stimulus in the months ahead. As such, the dollar remains towards the top of its recent ranges against the EUR and the other low-yielding G10 currencies. Conversely, the dollar, along with the other funding currencies, remains under pressure against the higher-yielding growth-sensitive currencies such as the AUD and NZD.

EUR - The euro has pared modest overnight gains to begin the US trading session largely flat against the dollar. While investors will certainly take note of the Fed announcement today, all eyes are on the ECB. President Draghi has stated that the Bank will do everything possible to backstop the Eurozone, but this has only further exacerbated the divide between the region's core and periphery economies. Draghi has proposed a plan in which the EFSF would purchase Italian and Spanish debt on the primary market supported by ECB purchases on the secondary market, but German officials clearly don't approve. Underscoring their position, Bundesbank President Weidmann stated that the ECB should not overstep its sole mandate of fighting inflation. In a bid to win over the opposition, Italian PM Monti and Draghi are in Helsinki today meeting with Finnish and German officials. However, with ECB also lobbying the Germans to approve the ESM - the region's permanent bailout fund - and provide it with a banking license, it seems unlikely that Draghi will push too hard to restart the debt-buying program.

GBP - Sterling edged lower yet again overnight, extending its weekly decline after PMI manufacturing tumbled to 45.4 from 48.4 in June. While the BoE has been relatively conservative lately as compared with its global counterparts, historically it has been one of the most unpredictable monetary bodies. In light of today's data, investors have begun pricing in further easing from the BoE, with signals of such possibly coming as soon as at their meeting tomorrow.

JPY - The yen remains well entrenched within its recent ranges, but is off its highs as investors look to the higher yielding currencies. However, with today's Fed decision and tomorrow's BoE and ECB meeting, the yen will likely remain well supported by its relative stability.

Commodity Currencies - The commodity linked currencies are generally stronger this morning as expectations of Fed and ECB support are spurring demand for higher-yielding assets. Raw goods are generally lower with gold falling to $1604/oz, copper dropping to $337/lb and consumables all in the red. The CAD extended its recent gains overnight, but remains above parity with the USD. The loonie has also been helped higher by the rising price of oil, Canada's main export. Similarly the MXN is back towards the high end of its recent ranges as the better-than-expected private payrolls report out of the US provides support. Mexican central bank governor Carstens reiterated that the Mexican economy remains reliant on US demand, forecasting that Mexican GDP will grow between 3.5% and 4.0% this year. Meanwhile, the AUD continued to grind higher, reaching a fresh 4-month best against the USD ahead of the Fed and ECB decisions. The NZD also gained by nearly half of a percent as investors are attracted to its relatively high yields and robust economic growth.