Morning Forex Overview

Previous session overview
On Wednesday, the dollar declined versus the euro after the Federal Open Market Committee voted to keep interest rates unchanged and the foreign exchange market concluded that it gave no signal of a near-term rate hike.

After a two-day policy meeting in New York, U.S. Federal Reserve Chairman Ben Bernanke largely kept the world's financial market guessing about his medium-term intentions for interest rates. Bernanke left interest rates unchanged at the meeting saying the world's largest economy "continues to expand" while adding inflation is expected to moderate.

On Tuesday, EURUSD trading was in a wait-and-see mode ahead the Fed interest rate decision. The Euro jumped higher as the market's digested the FOMC statement and pared down US rate hike expectations. New Industrial orders came in strong at 2.5% much better then forecasts of -0.6%. EURUSD traded with a low of 1.5537 and a high of 1.5686 before closing the day at 1.5665.

The Sterling made good gains against the weaker greenback but failed to keep up with the Euro. GBPUSD traded with a low of 1.9658 and a high of 1.9769 before closing the day at 1.9740.

On Wednesday, two events dominated the price action in USDJPY. After trading sideways in Europe, USDJPY spiked higher to the 108.40 area as higher than ex-pected US oil inventories triggered a decline in the oil price.

The Australian dollar was stronger and again within reach of its post-1983 float highs Thursday after the U.S. central bank indicated it was in no hurry to raise interest rates.

Market expectation
The U.S. dollar fell on Bernanke's comments, boosting the Australian dollar sharply. Currency watchers are predicting it will again test its post-float highs just beyond US$0.9650.

People in the currency market may have been looking for a more hawkish stance from the FOMC. That's allowed the euro a little bit of a relief rally.

EURUSD rising as non-Japanese Asian player's triggered stop-loss buy orders around 1.5670. EUR will likely to rise more as ECB "almost certain" to raise its rates next week.

The next key set of Euro zone data is slated for release are today, with Euro zone April current account balance and Germany's June CPI, retail sales. The inflation data from Germany is seen higher to 3.2% from 3.0% a year earlier, while easing to 0.2% from 0.6% a month earlier. However, retail sales in May are expected to reverse the 1.7% decline in April, rising by 0.5%.