In the highly anticipated monetary policy meeting yesterday, the US Fed decided to leave its benchmark interest rate unchanged at record lows. The US central bank indicated that the recent global economic and financial developments may restrain economic activity to a certain extent and is expected to put further downward pressure on inflation in the near term. The US Dollar weakened against its major counterparts following the Fed’s monetary policy statement.

In the absence of major global economic releases today, currency traders continue to mull over the dovish tone of the Fed. Going forward, Greece's parliamentary elections on Sunday will be in focus, with opinion polls providing no clear indication on the outcome of the elections.

Pound Sterling – UK Markets

After witnessing a sharp upside in the previous two sessions, the Pound is trading in a tight range against the US Dollar in today’s morning session. Wednesday’s encouraging UK labour market data had led Sterling to advance sharply against the greenback, while the crucial Fed monetary policy decision which triggered a broad-based weakness in the US Dollar helped the Pound to advance further and breach the 1.56 mark late yesterday. The US Fed decided to keep its key interest rate unchanged, citing global economic headwinds and lower inflation expectations. Meanwhile, currency traders largely ignored disappointing UK retail sales data released yesterday which added to speculation that the domestic economic growth might slow for the third quarter.

With no major domestic economic releases today, market participants look forward to BBA mortgage approvals and public finances data scheduled next week for further insights into the health of the British economy.

US Dollar – US Markets

Amid a lack of global economic macro triggers today, the US Dollar is trading lower against the majors.

The US Dollar lost ground against its major counterparts in yesterday’s trading session after the Fed, in its monetary policy meeting, refrained from raising the key interest rate. Only one policymaker, Richmond Fed President, Jeffrey Lacker, dissented from the central bank's decision to keep interest rates unchanged. The Fed Chief, Janet Yellen, in the post-meeting press conference, highlighted concerns surrounding the financial turmoil in China and other emerging markets along with the greenback’s strength. She acknowledged the recent improvement in labour conditions in the world’s largest economy, however was quick to add that the inflation growth was not up to the mark and continued to run below the central bank’s long term objective. Furthermore, the Fed Chief defended the central bank’s decision stating that the recent global financial and economic developments would put downward pressure on the inflation outlook in the near term, which could further pressurise economic activities in the US.

Euro – European Markets

The Euro continues to trade firmer against the greenback today as the Fed’s dovish tone and forecasts which indicated a lower possibility of an interest rate rise this year in the US provided some support to the common currency against the US Dollar. Meanwhile, with a relatively light domestic economic calendar today, the Euro investors will closely follow Greece’s snap elections scheduled on Sunday.

The Euro moved above the 1.14 level yesterday after the US Fed stayed put and opted to leave its key interest rate unchanged. Meanwhile, the Fed slashed its economic growth projections on the US economy, citing risks from weakness in the broader global economic growth. Additionally, the central bank downgraded its inflation estimates for this year. However, the FOMC assured that with proper policy accommodation, economic activity will accelerate at a moderate pace. Meanwhile, the ECB, in its monthly economic bulletin, revealed that downside risks to inflation and growth forecasts of the Euro zone has increased, but the central bank is convinced that the region would experience growth albeit at weaker pace than previously anticipated.

Other Currencies – Highlights

The Canadian Dollar has recovered from yesterday’s losses and moved higher against the greenback this morning ahead of Canadian consumer prices data scheduled later in the day. Despite expectations of the nation’s CPI to remain steady on an annual basis, a significant drop in the core inflation rate would heighten speculation for the Bank of Canada to introduce additional monetary support. Additionally, with the recent softening of oil prices, the central bank might be forced to leave its wait-and-watch approach and open the door for additional rate cuts.

The Canadian Dollar moved sharply higher against the US Dollar yesterday after members of the FOMC unanimously voted to keep the key interest rate unchanged. However, it pared most of its gains against the greenback later in the session after the Fed downgraded its growth forecast on the US economy.