US dollar: Analysts undecided as to how to approach EUR-USD ahead of today's uncertain FOMC meeting outcome

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Published on Wednesday, 20 June 2012 10:09

Written by Will Peters

"The level of uncertainty regarding possible policy outcomes is significantly greater than at the past several meetings" - Deutsche Bank.

Are we in for a renewed bout of US dollar (Currency:USD) strength? Or will yesterday's falls be extended? This all depends on events out of the US today.

Today sees the US Federal Open Market Committee (FOMC) meet to decide on the future direction of US monetary policy.

Yesterday's strong gains on global markets were indicative of traders positioning themselves for a possible announcement that more money is set to flow.

However, today sees a calm descend on the market ahead of the event. Indeed, there is uncertainty as to whether the FOMC will act at all.



The euro to dollar exchange rate is currently marginally higher on Tuesday's closing level at 1.2698. (PS. For the latest foreign exchange forecasts please visit our IMT site via this Facebook entry path).

Jyske Markets are neutral on EUR-USD, a morning note saying:

"Sell at 127.50 for 126.05 intraday. We are looking for below 130 or a breach of 125.25 for a more long-term sale against 120. Today’s FOMC monetary-policy meeting is an event risk. If the expectations of our macro economists prove right, you should sell EUR-USD now."

"Despite weakness in the UK job market, stocks are managing to stay marginally in positive territory in anticipation of the Fed making a positive announcement.  While much has been factored into share prices, stocks could still rally if Fed Chairman Ben Bernanke makes moves to further increase liquidity," says Manoj Ladwa, Head of Trading at TJ Markets.

Deutsche Bank warn that the level of uncertainty concerning today's meeting is elevated:

"The FOMC meeting concludes Wednesday and as per usual two-day meeting procedures, the statement will be released at 12:30 pm followed by the economic projections at 2:00 pm and the Chairman’s press conference at 2:15 pm. The level of uncertainty regarding possible policy outcomes is significantly greater than at the past several meetings. We remain of the view the Fed is not going to implement additional policy easing at this meeting and hence Twist will expire on schedule at month-end."

Also commenting on the euro dollar rate is Simon Denham at Capital Spreads, "despite some surprise weak figures on the German economic sentiment, the euro rose 113 pips to 1.2688 yesterday in anticipation the Fed will pledge more measures to stimulate the US economy.  At the same time a world leaders’ summit in Mexico was also a supportive feature as it promised more coordinated action around the globe to boost growth."