EUR/USD Is Steady As Markets Eye Fed Policy Statement

 | Oct 30, 2013 09:24AM ET

The EUR/USD has edged higher in Wednesday trading. The pair continues to trade in the mid-1.37 range in the European session. US releases were weak on Tuesday, as Retail Sales, PPI and Consumer Confidence all lost ground in September. The markets are closely monitoring the US Federal Reserve, which will wrap up a policy meeting with a statement on Wednesday. As well, two key events will be released later in the day - ADP Non-Farm Payrolls and Core CPI. In the Eurozone, Spanish GDP and German Unemployment Change were within market expectations.

The Federal Reserve winds up a policy meeting on Wednesday, its first since Congress hammered out an agreement on the debt ceiling and reopened the government. However, the agreement is little more than a band-aid solution which has pushed off the debt ceiling and budget deadlock for a few months, without resolving these two issues. Meanwhile, recent US data, notably employment numbers, have been sluggish. Given this situation, the Fed is unlikely to push the taper trigger until early 2014. The markets will be waiting for the Fed policy statement later today, and we could see some volatility in the currency markets afterwards.

After last week’s disappointing employment numbers, we’ll get a look at ADP Non-Farm Payrolls on Wednesday. Although this is not an official release, it is a key employment release which can move the markets. Last week, Unemployment Claims came in above the estimate and Non-Farm Payrolls tumbled to a six-month low. The weak readings are weighing on the US dollar, which finds itself close to two-year lows against the euro.

German employment numbers are also causing concern. Unemployment Change came in at 2 thousand in September, just above the estimate of 1 thousand. Although this is a decent reading, this is the indicator’s third consecutive increase, raising concerns that the German economy is slowing down. The jobless rate was unchanged at 6.9 percent. If the eurozone is to remain out of recession, it can ill afford for Germany, the region’s number one economy, to slow down. We’ll get a look at other key German releases on Thursday.