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All eyes on the AUD/USD and the FOMC meeting

Four key markets in focus today.

AUD/USD

At 10:30 today we get the Westpac leading index, although AUD/USD has bigger issues on its radar, namely the FOMC meeting. We should hear narrative at 04:00, while the Ben Bernanke press conference is at 04:30. There are so many variables involved here, but we will be looking out for the size of the taper (the market expecting $5 billion to $10 billion cut from the Fed’s bond programme). Perhaps more importantly will be language around forward guidance with regards to the threshold around putting up the Fed funds rate; a change to 6% from 6.5% unemployment will be seen as dovish and thus should see AUD/USD rally. The Fed’s economic projections are also key.

US 500 cash

The US stock market rallied to 1705.52 overnight, four handles away from a new all-time high. All eyes fall on the Fed tonight (04:00), although housing starts (expected to print 917,000) and building permits (950,000) could also be of interest. A dovish Fed could see the market print a new high.

GBP/USD

At 18:30 we get BoE minutes and the market will be keen to explore for signs of how robust the bank sees the recovery. Cable is overbought at present, although we feel pullbacks should be supported.

Fortescue Metals (FMG)

Chinese equities fell heavily yesterday, with traders taking money off the table before the two day Chinse holiday. Steel prices in China have already started falling and yesterday we saw iron ore prices play catch-up, with prices dropping 2.2%. Iron ore may start getting more focus again, with supply expected to come on the market later next month, with consensus closer to $110 per tonne.

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