FOMC Decision due at 2:15 PM
The Fed will likely keep the tone to “cautiously optimistic”. The optimism is likely to come from a stability/small bounce off low levels. This is not necessarily a great thing as we are at low levels and at some point the economy can’t go lower. The employment job slowing is an example of this. At some point, most of the job cuts have been eliminated.
Regarding asset purchase program, it is likely the Fed continues on their course (300 billion is earmarked and scheduled to be complete in September). The risk of higher rates is certainly not a welcome development for the Fed and they cannot risk the implications from that potential move should they cease the program (i.e. start that leg of the exit strategy).
Regarding rates, the Fed is likely to be on hold for some time and will likely not pigeon hole themselves by putting a schedule on tightening.
How will the Forex market react? I do not think that what they say or don’t say will not be a shock to the market. However, the price will most likely have a volatile period immediately after the report. Once settled however, I think the story of the day continues. That story today does seem to be more focused on weakening the other currencies rather than strengthening dollar. However, by default, the dollar is likely to continue to rally.
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