FX markets are generally quiet as they await the major event risk of the Fed, where the new FOMC statement and projections are released at 20CET tomorrow. Today's US focus will be on whether the US debt limit gets raised and also whether Joe Biden's Build Back Better stimulus package can make any progress in the Senate. Broader themes, global market sentiment and Omicron headlines will likely drive direction today.
The CAD is finding it hard to move higher as the USD, Omicron and commodities continue to drive direction. The USD/CAD should remain rangebound ahead of tomorrow’s Fed announcement. Look for the loonie to trade on broader market themes. There remains a possibility of a loonie breakdown possibility seeing the USD/CAD pair test 1.29 in the short term.
EUR/USD will continue to trade a range into tomorrow's Fed meeting. Positioning can prompt some aggressive moves, where the hawkish set of Fed Dot Plots in September actually saw EUR/USD rally in the aftermath to 1.1750, before subsequently dropping 5%. Not much happening today in the Eurozone so the single currency is likely to take direction from broader market moves.
European natural gas prices continue to drive higher which would usually provide fuel to the view that higher energy prices would make it more likely that the BoE would respond with a hike. Elsewhere, today's UK jobs data looks encouraging in that the claimant count continued to drop in November despite the ending of the furlough scheme in September. On another day that might have supported BoE tightening expectations and the pound but, as it is, Omicron dominates.
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