Dollar Rate Today (30/10): USD Could Surprise Us All And Bounce Higher In Post-FOMC Trade

The pound dollar exchange rate is 0.12 pct higher on a day-to-day basis at 1.6063.

The euro dollar exchange rate is 0.1 pct higher at 1.3761 while the Australian dollar to US dollar exchange rate is 0.23 pct higher at 0.9503.

NB: The above are spot market quotes; your bank will affix a spread to the figures at their own discretion. However, an independent retail FX provider will guarantee to undercut the rates offered by your bank, thus delivering up to 5% more FX.

ADP employment data worries USD bulls

The dollar rate has headed lower today following on from the release of the ADP Employment Change (Oct) number which came in below expectations.

The figure read at +130K - analysts had predicted 150K.

Boris Schlossberg at BK Asset Management called the US dollar's reaction to the ADP numbers correctly when he said:

"One of the key pillars of the Fed's taper policy is steady and growing employment data. If the news today shows a serious deterioration in labor demand then currency markets could begin to price in the prospect of a delay all the way to Q2 of 2014. The dollar therefore could weaken further as sentiment towards US economy sours."

The big event is at 18:00

The US Fed's Monetary Policy Statement is due at 18:00 today - this will likely give currency markets a fresh shot of impetus.

The monthly MBS and Treasury Purchases expected to remain unchanged at the total of USD 85bn on monthly basis.

The policy rate is expected to remain unchanged at the historical low of 0.25% and the Fed will perhaps not start tapering its bond purchases given the weakness in the latest jobs data and the unresolved budget turmoil which had resulted in 16-day government shutdown in October.

"Yet the accompanying statement is crucial today. Dovish expectations on Fed being already broadly priced-in, we suspect that any “less dovish” comments may trigger correction given the oversold conditions in USD," says Ipek Ozkardeskaya at Swissquote Research.

Confirming these dovish expectations for today is Sverre Holbek at Danske Bank:

"We expect the FOMC to strike a more dovish tone than in September, given that
recent data suggest a loss in growth momentum even before the government shutdown
struck.

"Further, the outlook for 2014 has become more blurred and we expect the forward-looking part of the statement to reflect this. Markets have already pushed their
expectations of the first Fed funds rate hike to Q4 15 and we think it will be difficult to push that first hike further into the future even with a dovish statement tonight."

So with all these dovish expectations, combined with an suppressed US dollar we would expect the bias for upside surprises to be high.

We predict a bounce higher in the US dollar tonight.