Forex Today: AUD lifted by China PMI, eyes on UK PMI, EZ GDP ahead of Fed

Despite full markets having returned, forex today in Asia was a quiet affair, as the US dollar attempted a minor correction against its main competitors heading into the FOMC decision due later on Wednesday. Most majors steadied in narrow trading ranges as pre-Fed caution persisted across the Asian equities.

The Yen was underpinned by better Japanese services PMI reading while the Aussie got a fresh boost from an unexpected improvement seen in China manufacturing sector activity for April. Likewise, the Kiwi benefited while upbeat NZ jobs also kept the sentiment buoyed.

Among the commodities space, a relief rally is seen across the board, with gold prices back above the $ 1310 mark while both crude benchmarks are crawling higher, supported by Iran concerns. 

Main topics in Asia

BoC Poloz: hopeful as ever, but still playing on the safe side

Bank of Canada (BoC) Governor Poloz gave statements during a Q&A today regarding interest rates and the BoC's stance moving forward.

Japan April services PMI rises to highest in six months

Japan's service sector expanded at the fastest pace in six months, courtesy of a pick up in new orders. The index remained above the 50 threshold, showing expansion for the 19th consecutive month. 

Fitch Affirms Australia at 'AAA'; Outlook Stable

The news is crossing the wires via Reuters that ratings agency Fitch has affirmed Australia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AAA' with a Stable Outlook, citing strong governance, high-income levels, and a track record of macroeconomic stability. 

China April factory growth edges up marginally, export orders shrink: Caixin PMI - Reuters

The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) climbed to 51.1 in April from a four-month low of 51.0 in March and bettered the consensus estimate of 50.9.

S&P cuts Turkey's rating deeper into 'junk' in an unexpected move - Reuters

The US-based ratings agency, Standard & Poor’s (S&P) slashed its sovereign debt rating on Turkey further into junk territory late-Tuesday, in an unexpected move, Reuters reports.

US’ Trade Adviser Navarro: US mulls quotas on steel, aluminum after extending deadline

White House Trade Adviser Peter Navarro told steel industry executives late on Tuesday, via Reuters, the US officials are considering quotas and “other restrictions” on steel and aluminum imports.

Asian stocks trade mixed ahead of the Fed

Asian markets are lacking clear direction today as investors await the Fed's view on interest rates, inflation, and the economy.

Key Focus ahead

Today’s EUR macro calendar holds plenty of risk events, kicking-off with the Swiss retail sales, followed by a string of final manufacturing PMI reports from across the Euro area. However, the main market movers in Europe are likely to be the UK construction PMI and Eurozone flash GDP estimate, which is expected to drop to 0.4% q/q in the reported month versus 0.6% last.

Ahead of the US open, the US ADP jobs data will be reported, which usually acts a proxy to Friday’s payrolls and hence, holds quite a significance for the dollar trades. The EIA weekly crude stockpiles data will be eyed alongside the speech by the ECB policymaker Weidmann.

Despite these events, the main event risk for the fx space today remains the FOMC monetary policy decision due to be announced at 1800 GMT. The Fed is widely expected to stand pat on the interest rates today, but the statement could provide fresh hints on a June Fed rate. A hawkish language in the statement could put a fresh bid under the US dollar, sending the DXY back towards the 93 handle.

Will EUR/USD find acceptance under 1.20?

The EUR/USD pair closed below 1.20 yesterday - its weakest daily close since January 11 and could extend losses further, according to fundamental and technical studies.

Water-logged GBP/USD continuing to sink, 1.36 barely holding

Wednesday brings the PMI Construction index for April at 08:30 GMT, which is expected to climb from 47.0 to 50.5. Economic indicators for the UK have softened extensively in the latter half of April and the GBP …

FOMC and ADP preview - Nomura

There are two key data points/events, for the US on Wednesday, and analysts at Nomura offered a preview.

FOMC Preview: Fed to pause for breath this week - ING

Analysts at ING offer a sneak peek at what to expect from today’s FOMC monetary policy decision that will be announced at 1800 GMT.

Are Dovish Central Bank’s doing the USD heavy lifting?

Suggesting central bank policy divergence and the widening interest rate differentials have G-10 traders taking the dollar bull by the horns. It’s now over to the FOMC to hold up their side of the bargain as so far …