Focus on Fed meeting tonight
Financial markets have traded with a more positive tone overnight after disappointing US economic data was likely seen as confirming that the Fed’s super-loose monetary policy will remain in place for now. This had the slightly counter-intuitive effect of providing USD with some strength.
In Europe today, we are likely to see a slightly above-consensus German inflation figure and expect a small pick-up in German unemployment.
The big focus today (and indeed this week) is the statement associated with the Fed FOMC meeting this evening. No change in interest rates is expected in the FOMC’s statement tonight, nor is the committee expected to provide any explicit timing on tapering. This should continue to provide a supportive environment for investment and hence a weaker USD.
Later tonight, the RBNZ will likely leave the official interest rate unchanged at 2.50%, as widely expected. We think the high level of the NZD will again be noted, but the RBNZ may also be a bit more optimistic on the economic outlook given the recent pick-up in business and consumer confidence