Dollar Mildly Softer After FOMC Offered Nothing New, Yen Even Weaker

The dollar turned a bit softer overnight after FOMC left rates unchanged at 0-0.25% as widely expected and offered no surprise to the markets. The Fed maintained it's pledge to keep rates at this ultra low level until mid-2015 and held the USD 40b per month open-ended QE3 program unchanged too. In the accompanying statement, the Fed showed concern that "without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions."

And the Fed could even expand its efforts “if the outlook for the labor market does not improve substantially.” While the greenback dipped mildly against most major currencies, it strengthens against the even weaker yen as Asian equities opened mildly higher, diverging from weakness in US stocks.

The New Zealand dollar rebounded after RBNZ left rates unchanged at 2.50% as expected and the accompanying statement somewhat quashed hope for a rate cut. The new RBNZ Governor Graeme Wheeler said in the statement that "market sentiment has improved from earlier in the year, suggesting the risks to the global outlook are more balanced."

Domestically, "GDP continues to expand at a modest pace". But "fiscal consolidation is constraining demand growth" and high NZD is "undermining export earnings." Regarding inflation, RBNZ expects CPI to "head back towards the middle of the target range". And RBNZ pledged to "continue to monitor inflation indicators" closely over the coming months. That's said, RBNZ left no hints on rate cuts.

Meanwhile, Canadian dollar was back under selling pressure after BoC Governor's comments as Carney noted that "the case for adjustment of interest rates has become less imminent." That's in contrast to the central bank's statement on Tuesday which still noted that "over time, some modest withdrawal of monetary policy stimulus will likely be required." The monetary policy report released yesterday noted that “following the recent period of below-potential growth, the economy is expected to pick up and return to full capacity by the end of 2013." 2012 growth is projected to be 2.2%, followed by 2.3% in 2013 and 2.4% in 2014.

On the data front, Japan corporate service price index dropped -0.5% yoy in September. China conference board leading indicator rose 0.3% in September. Main focus in European session will be on UK Q3 GDP, which is expected to to show 0.6% qoq growth, following -0.4% contraction in Q2. Other data to be watched today include eurozone M3 money supply, US durable goods orders, jobless claims and pending home sales.