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Forex pairs in this Article » EUR/USD, USD/CHF (London) - Heading into the European session, everything remains about the Fed. The FOMC yesterday decided to keep the open-ended QE programme unchanged, continuing with its $85bn monthly asset purchases. Expect to see equity markets add to yesterday’s gains, where the S&P smashed to new highs at 1,729.44. 10-year Treasuries shed 17bps.

The Fed also issued its economic projections. The FOMC now expects GDP to come in at 2-2.3 percent this year, a downward revision from its previous 2.3-2.6 projections last time. Committee members also revised the unemployment rate downwards to come in at 7.1-7.3 percent. Three Fed officials expect the first rate hike to come in 2014, 12 expect it in 2015, and two in 2016. The FOMC forecast for the 2016 rate path is 1.75-2 percent.

Expect to see a reversal in any bullish dollar trends. The Kiwi dollar drove USD from USD0.8240 to USD0.8383 overnight. NZDUSD shed some gains down to USD0.8330 before regaining ground USD0.8375 on stronger than expected second quarter GDP figures.

With the Fed shifting the timetable for any tapering of QE into 2014, we could see continued shifts away from dollar longs by fund managers, in the medium-to-long term putting EUR/USD and GBP/USD on track to test this year’s highs, at USD1.3710 and USD1.6365 respectively. EUR/USD currently stands at USD1.3540 with support at 1.3375. Cable currently stands at USD1.3540.

The Swiss National Bank meets today, when it is expected to maintain its three-month franc Libor rates at zero, and continue to defend its CHF1.2000 floor under EURCHF. EURCHF is neutral running onto the SNB announcement, with a bearish USDCHF finding resistance at CHF 0.9100.
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