USD: FX quiet into Wednesday's ADP & FOMC - Scotiabank

FX markets are relatively quiet with limited movement across all of the G10 currencies as we head into Wednesday's NA session, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD steady into ADP, Q2 GDP, quarterly refunding and FOMC

"All eyes are on the 2pm ET Fed decision, where a hold (4.50%) is widely expected and dovish dissent is anticipated. In terms of performance, we're seeing modest gains in GBP, JPY, and MXN and modest losses for the AUD as all of the remaining G10 currencies trade flat vs. the USD. The relative performance of the G10 currencies is offering no clear signal in terms of the market's tone, and asset markets are confirming as equity futures consolidate just below Monday's record high and as US yields trade in a tight range with the 10Y steady following Tuesday's ~10bpt decline."

"Treasurys rallied and the curve flattened in response to a solid 7Y auction on Tuesday, as investors offered clear signs of demand ahead of today's 8:30am ET quarterly refunding announcement. In commodities, oil prices are pulling back from the upper end of their July range and copper prices continue to trade defensively following their recent rally. Gold prices are steady, and we're seeing an extension of the flat consolidation range that we've observed since April."

"Aside from the Fed (2:00pm ET statement, 2:30pm ET press conference) we look to near-term risk in the 8:15am ET ADP employment release (exp +75K), the 8:30am ET Q2 GDP release, and the 10am pending home sales data. The bar to a dovish surprise remains low, given that markets are still only pricing in 16bpts of easing for September and less than 50bpts by year end. Chair Powell's press conference tone will be key, as markets will look to the Fed's assessment of recent trade policy developments and their implications for the FOMC."