The US dollar was in tight trading mode ahead of the FOMC decision, which saw the central bank keep rates unchanged as expected. During the presser, Yellen sounded optimistic about growth despite the likely transitory dip coming from the impact of the hurricanes. She also confirmed that they will be starting the balance sheet runoff in October, which would also put upward pressure on rates. The dot plot and CME FedWatch tool have indicated stronger expectations for another rate hike in December as well.
The euro gave back some of its recent gains even though the region’s medium-tier data beat expectations. German PPI rose 0.2% versus the projected 0.1% uptick but traders might be booking profits ahead of Draghi’s speech and on account of recent jawboning by other ECB officials.
The pound got another boost from upbeat UK retail sales, which reflected 1.0% growth in consumer spending versus the projected 0.2% uptick and the previous reading, which was upgraded from 0.3% to 0.6%. Only lending data is up for release today as traders might hold tight until UK PM May’s Brexit speech next week.
The franc had a mixed run as it reacted mostly to its counterparts. There were no major reports from Switzerland after all, so the currency likely reacted to market sentiment as well. SECO economic forecasts and the Swiss trade balance are up for release today, with the latter projected to show a smaller surplus of 2.41 billion CHF compared to the earlier 3.51 billion CHF figure.
The yen has regained some ground against most of its peers as traders may be lightening up positions ahead of the BOJ decision. The currency has lost to the dollar, though, as the FOMC set the date for its balance sheet runoff in October and maintained December hike expectations. No actual changes in rates are expected from the Japanese central bank but any downbeat remarks could keep weighing on the yen.
Commodity Currencies (AUD, NZD, CAD)
The Aussie and Kiwi continued to sustain their lead against most of their peers as a widening lead for New Zealand’s National Party in the polls is seen as a bullish scenario. New Zealand’s GDP is due next and a 0.8% growth figure is eyed, stronger than the earlier 0.5% expansion.