Dukascopy Daily Forex Overview

Previous session overview
On Tuesday, the dollar traded in tight ranges against the euro and the yen as investors held their positions ahead of the decision on interest rates due late Wednesday from the Federal Open Market Committee. Euro-dollar trading awaited results of the Fed's monetary meeting later Wednesday.

US durable goods orders rose 5.2% in December.

US consumer confidence fell from 90.6 to 87.9 in January.

US house prices fell 7.7% yr in November.

The U.K. pound climbed above $1.9900 against the dollar for the first time this year as investors reassessed the importance of more possible rate cuts by the U.K.'s central bank.

USD/JPY implied volatilities rise as players adjust positions ahead of Fed rate decision tonight.

The Sterling rose despite easing UK house prices and firming expectations of near-term interest rate cuts despite concerns of higher inflation.

USD/JPY implied volatilities rise as players adjust positions ahead of Fed rate decision tonight.The Japanese yen is trading softer, hurt by Bank of Japan governor. News that Japanese spending rose while unemployment was unchanged in December did not provide much direction for the yen.

The Canadian, Australian and New Zealand dollars continued to extend their gains despite a retracement in gold prices and a marginal rise in oil prices.

Market expectation
The euro is expected to remain strong on continued negative dollar sentiment and risk aversion in the market.

The GBP is expected to trade in a tight range ahead of the Fed meeting. There are a few pieces of housing market data due for release tomorrow. Given that housing is one of the most vulnerable aspects of the UK economy, the data is not expected to be pound bullish.

JPY - expect the currency to benefit from risk aversion as investors dump risk positions in high-yielding currencies in favor of low-risk, low-return currencies such as the yen.

The Reserve Bank of Australia is expected to raise rates by 25 bps to 7 percent in February.

The Fed's rate decision is the key focus for markets at the moment, and it seems that the field is wide open - forecasts range from no change to a 75bp cut.

Tonight's Q4 GDP figures will also be closely watched - a significant slowing from Q3 is expected, but no one is expecting a negative number.

Today sees December building consents, which are expected to remain subdued outside of the volatile apartment's component.