FOMC rate decision will be the highlight of the day – TDS

Analysts at TD Securities (TDS) offered a brief preview of Wednesday's key event risk – the latest FOMC policy decision – and see no change to the Funds rate.

Key Quotes:

“Today's FOMC meeting is, naturally, our main focus for the day. With the Fed expected to maintain the status quo, we are not looking for a significant FX market reaction, however. Here, the USD still remains the best of a bad lot particularly as FX is preoccupied with virus contagion fears.”

“We do not expect a major shift in Fed sentiment, but markets will focus on any remarks regarding the Fed balance sheet and the IOER increase. We expect a 5bp rise in the IOER rate to 1.60%, with the change downplayed as just a technical adjustment.”

“Tweaks to the FOMC statement are likely to be minor, with policy still described as "appropriate" but with officials also still in "monitor[ing]" mode, consistent with an easing bias.”

“Meanwhile, 1.0980 will be a crucial gateway to a more pronounced downside extension in EURUSD. There, the 1.0925/40 support zone would be the next objective for a move lower.”