News & Data:
Markets have been rather quiet in the past 24 hours, as traders are waiting for the key event of the week – the FOMC meeting tonight. While equity markets have mostly stayed unchanged, precious metals were under a lot of pressure yesterday. Gold suddenly declined to a low of $1143 in yesterday’s NY session and contracts worth more than one billion USD were traded within a single minute. The metal bounced off the level, but momentum quickly waned. Gold is back at $1150, while Silver currently stands at $15.55.
In the FX market, EUR/USD had a decent short squeeze, with the pair extending gains towards the 1.0650 level. However, good selling interest emerged there and the pair fell back below 1.06 in Asia. GBP/USD declined sharply and hit a low of 1.4730, with EUR/GBP buying partly blamed for the move. USD/JPY remains quiet and this is unlikely to change pre-FOMC. Meanwhile, the commodity currencies are again a tad weaker. NZD/USD dropped after the GDT auction and dragged the Aussie lower as well. USD/CAD is consolidating around 1.28 as Oil remains weak and should the FOMC meeting be USD-positive, a breakout above 1.2820 seems imminent and there is no significant resistance until 1.30 then.
Regarding the FOMC tonight, most analysts expect the Fed to remove its language that suggests it will stay patient in beginning to normalize their monetary policy. However, Chair Yellen is likely to emphasize that the Fed will be looking to gradually normalize monetary policy and that the timing of a rate hike is now fully data dependent. Further, traders will be closely watching for any comments on the recent USD strength from the Fed.
On the other side, a "dovish surprise" would be the Fed keeping their "patient" phrase in the statement, downward revisions in the Fed projections, as well as Yellen dampening market expectations by mentioning the slow growth in wages.