Market Brief
Yesterday's key event was the US FOMC meeting where policymakers kept rates on hold as expected. The headline aside, markets were more keenly awaiting the accompanying statement for an insight into how Fed officials have incorporated recently improved US data into their policy view, and whether this environment of cheap liquidity would continue going forward.

True to form, the statement was largely a cut-and-paste job of last month's release, and included the key sentence that rates would remain exceptionally low for an extended period, a crucial phrase that has underpinned the recent asset rally. EURUSD rallied from around 1.4850 before the release to just above 1.4900, but price action after that was very choppy between 1.4825-1.4910 as markets digested the wording of some of the later sections of the statement. A new insert to the wording was that improved growth alone did not warrant higher rates, and mentioned for first time that this would depend on the evolution of low rates of resource utilization, subdued inflation trends and inflation expectations from here. This is likely to make Friday's Non-Farm Payrolls a critical event for investors (if it wasn't already). The committee also announced that the agency debt buying program would be cut back to $175bn from $200bn, but clarified that this reflected the limited availability of agency debt.

The results of the meeting should be broadly positive for risk assets, but after a big rally from EURUSD, equities and gold in the run-up to the event, prices have moderated slightly in the aftermath. Gold tipped to a new all-time high at 1097.80 in the evening before profit-taking set in and we have dealt down to a low of $1084.80 this morning. Meanwhile Asian equities have been mixed to lower, and European futures are pointing to a mildly lower open.

Today's main events will of course be the BoE and ECB meetings. The main focus for the BoE meeting will be the MPC's response to recent UK data; it is largely guaranteed by the dismal Q3 GDP that an extension to the QE program will be deemed necessary, but market estimates have drifted between whether this will be GBP25bn or GBP50bn. We feel that the MPC will likely increase the plan by 25bn to a total of 200bn, and choose to re-assess at subsequent meetings whether more is necessary. However a significant number of economist estimates now look for a 50bn increase (to 225bn total), so there is scope for GBPUSD to either sell-off or rally depending on which of the two scenarios plays out.

The ECB meeting is expected to produce another unchanged rate decision, but the markets will be sensitive to any official references to currencies and EURUSD strength. Trichet's press conference will be keenly eyed for mentions of this, especially in the Q&A session after the statement. Also today Swiss CPI will be released and consensus is looking for -0.7% y/y. The SNB's Jordan said inflation would be the main determinant for the SNB's exit from current policies. With inflation expected to remain in negative territory, the SNB will likely continue its FX intervention policy.

Currency Tech
R 2: 0.9220
R 1: 0.9145
CURRENT: 0.9036
S 1: 0.8970
S 2: 0.8910

R 2: 1.0960
R 1: 1.0870
CURRENT: 1.0677
S 1: 1.0596
S 2: 1.0500

R 2: 135.00
R 1: 135.73
CURRENT: 133.96
S 1: 132.50
S 2: 131.70

R 2: 13.455
R 1: 13.405
CURRENT: 13.3215
S 1: 13.205
S 2: 13.175