Today is an important day for the currency markets since Fed policy makers will decide whether to taper its $85 billion-a-month bond-buying program. Currently market expectations are for a $10 billion taper on the current $85 billion bond buying stimulus program.
The dollar will be driven by the Fed decision. A negative scenario for USD would include no tapering and a downgrade to the US growth outlook.
Meanwhile, what would send the dollar higher would a larger than expected tapering and a more hawkish and positive outlook to the US economy.
The Fed statement is at 2pm EST followed by a Bernanke press conference at 2:30pm EST.
EURUSD was flat in the European session after a very quiet Asian session, trading a 20-pip range around $1.3350.
GBPUSD rose 0.4 percent due to sterling being boosted after the Bank of England policy meeting minutes. MOC members judged that further stimulus was no necessary. The pair hit an eight-month high of $1.5978 after the news, 70 pips up from a low of $1.5906.
USDJPY has traded in a narrow range for several sessions above 99.06 since Monday. There was a brief dip to 98.77 yen in mid-session trading in Europe. This pair will be most volatile during the Fed announcement.Publication source