The main focus today is on the Fed and in the run up, we are seeing dollar bulls and bond sellers take their foot off the gas pedal on the day. The greenback is trading down across the board in European morning trade, with the euro a notable beneficiary as the ECB is about to meet in an emergency meeting to discuss the bond rout.
The euro is trading up by 0.7% on the day around 1.0485 as it runs into some minor resistance from the 23.6 Fib retracement level highlighted earlier here. Meanwhile, cable is also catching a little reprieve to 1.2080 after having hit a low of 1.1985 earlier in the day:
The pound continues to be in a world of hurt as the UK leads the recession race and there are growing doubts surrounding the BOE's appetite to hike rates.
Elsewhere, USD/JPY is down 0.6% to 134.65 from 135.10 at the end of Asia trading with 10-year Treasury yields down 7 bps to 3.415% at the moment. The drag in Treasury yields is not helped by the slump in European bond yields as traders await to hear from the ECB meeting at the top of the hour.
Looking to equities, overall sentiment is holding up with European indices posting over 1% gains with Italy's FTSE MIB leading the way and being up by over 3% on the day. S&P 500 futures are also seen up 0.7% and that is helping with the mood in commodity currencies.
AUD/USD is up 0.9% to 0.6930 while NZD/USD is up by 0.4% to 0.6240 currently.
But regardless, the Fed will be the deciding factor for what comes next for the remainder of the week.