Tuesday, 21 Sep 2010

USD Remains Low Ahead of FOMC Statement

Ahead of the latest Federal Funds Rate announcement and a statement from the FOMC, the US dollar has been falling against its main currency rivals throughout the day. Both news events, scheduled for 18:15 GMT, are likely to generate heavy volatility for USD pairs as investors are debating if the Fed will usher in new monetary easing policies. Should any new policies be announced, they will likely put further downward pressure on the greenback, as it would be a signal of the slow pace of the US economic recovery.

Today, the dollar had fallen some 70 pips against the euro before staging a slight correction. Currently trading around the 1.3115 level, the EUR/USD pair appears to have settled above the 1.3100 level. Since last night, the USD/JPY has dropped some 40 pips and is currently trading at 85.40.

In addition to the FOMC statement, traders will also want to pay attention to the US Building Permits figure. Set to be released at 14:30 GMT, the result is forecasted to generate heavy trading. New building construction has proven to be a cornerstone of the US economic recovery, and as such, the number of new building permits issued has caused market volatility in the last few months.