Trading conditions were generally subdued on Wednesday with little commitment to fresh and aggressive positioning given the high degree of event risk and uncertainty over underlying trends.
The early Euro-zone economic releases did not have a significant impact as German unemployment rose marginally for the third successive month while Spanish GDP was confirmed as rising 0.1% for the third quarter.
There was a decline in German consumer prices of 0.2% for October to give a year-on-year increase of 1.2% compared with an expected 1.4% and this could give some additional leeway to the ECB as it considers whether to cut interest rates further at forthcoming policy meetings.
The US ADP employment report was weaker than expected with a headline increase of 130,000 for October compared with expectations 150,000 and there was also a downward revision to September’s data. The headline CPI data was in line with expectations while the core increase was slightly lower than expected at 0.1%.
The combined data releases maintained expectations of a dovish Fed statement following the latest FOMC decision due later on Wednesday with Fed officials still concerned over the pace of growth. There were, however, important uncertainties surrounding language that will be used in the statement which did provide some dollar protection.
The market mood was certainly very different compared to the previous Fed meeting in September when there were strong expectations that the Fed would start a tapering of bond purchases. EUR/USD found support on dips to below the 1.3740 area and pushed to the 1.3770 region with narrow ranges dominating.
After pushing higher during New York trading on Tuesday with a move above 98.0, USD/JPY was broadly resilient with support on any approach to the 98 area with the disappointing US data releases capping further rally attempts as the yen edged weaker on the crosses.
Sterling developments were dominated by technical considerations with little in the way of fresh fundamental activity. There was further speculation over a medium-term GBP/USD peak given the inability to break resistance in the 1.6250 region while there was solid near-term support on approach to the 1.6000 area as markets waited for a dollar cue before making a fresh move.