More of the same ahead of the FOMC decision, with continued choppiness and a lack of directional conviction. Tuesday’s slight interest to sell USD was fast faded, though we saw some EM currencies underperforming during the day. Overnight, we’ve seen limited movement across the board though there is more of a USD selling theme. USDCNH testing 6.40 may be driving this latest move, though we note that USDMXN resistance is holding. Overall, moves were modest, oil markets were soaring on the back of a mix of post-pandemic demand and restricted production. On the equity front, Nikkei eased 0.5%, but South Korean stocks rose 0.6% to a record high after five months.

Looking ahead, we do have some data ahead of the FOMC. China’s retail sales, IP and fixed assets data will earn more focus at 08:00 BST instead of CPI data for both GBP and CAD. These will serve as the other main pre-Fed highlights amid some important technical developments for the two currencies. Headline risk remains for RUB as US President Biden meets with Russian President Putin this afternoon and ILS with the potential return of Gaza headlines.

RBC Capital Markets

FOMC: We expect markets to focus mainly on two aspects of today’s FOMC announcement. Firstly, any guidance on the timing of QE tapering. As several Fed officials have now “talked about talking about” taper, it would almost seem odd if it does not come up at this meeting. That doesn’t mean conclusions will be drawn (not likely to happen), but it feels like the initial conversation is likely to kick off here. With the statement likely to be little changed, this is more for the press conference. Secondly, changes to the dot plot. In March seven contributors called for a rate hike by end‐2023. It would only take two more to join them for the median forecast (on which markets put an unreasonable amount of weight) to rise from flat to higher, which would be a USD‐ positive development.