The US FOMC outcome is liable to trigger additional dollar volatility on Wednesday. The dollar will be vulnerable to additional selling pressure if the Fed announces additional buying of bonds through the quantitative easing plan. The overall net risks look to be for a slightly weaker dollar running into the FOMC with some significant recovery after the Fed meeting if there are no further quantitative measures and tough Euro resistance above 1.3280. If the Fed does announce additional measures, a slide to at least 1.3370 is realistic. The best strategy looks to be selling any Euro rallies to above 1.3350.

The US data maintained the recent pattern of being stronger than expected with consumer confidence rising to 39.2 in April from a revised 26.9 previously, although this is still at an historically very weak level. In addition, the Richmond Fed index rose to -9 from -20 the previous month while house prices fell 18.6% in the year to February.

The net impact was to boost confidence and the seemingly paradoxical reaction was again a key feature with the dollar weakening on favourable US news as risk appetite improved. The Euro pushed to a high of 1.3275 in Europe on Wednesday.

The first-quarter US GDP report was weaker than expected with a 6.1% annual contraction, little changed from the previous quarter. Inventories continued to decline sharply which will cushion the impact to some extent, but risk appetite was still more fragile.