Forex Asia Market Update

Comments from the PBoC yesterday contributed to volatility in USDJPY, but overall the USD finished the US session relatively unchanged against most major currencies.

EURUSD traded between 1.2810 and 1.2898 over the combined European and North American sessions, while USDJPY traded between 114.78 and 115.43.

Tuesday's Fed result alone will not be sufficient to push the USD out of broader ranges. Though the Fed has now paused, the FOMC delivered an accompanying statement with little changes in the forward looking policy guidance which, in a nutshell, implied the potential for additional hikes still depends on upcoming data.

The TIP bond spread has surged higher in recent days following the FOMC result, with the 10-year spread now at 2.65%, versus 2.6% levels as of last Friday. This could spark a renewed hawkish commentary from Fed officials, when they resume speaking from Wednesday next week, and PPI and CPI data is also due next week.

Looking ahead, trade balance is due at 1230 GMT and the market expects the deficit to widen slightly to US$64.5 bln from US$63.84 bln in May.