Dollar strengthened overnight after FOMC announcement and stays firm in Asian session today. Market reactions suggested that investors viewed the September FOMC meeting as a hawkish one although the Fed retained the language that 'it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends'. Meanwhile, the Fed continued QE tapering and announced a further US$10B reduction in asset purchases. On the accompanying statement, it is stated clearly that the asset purchase program would end at its next meeting. The Fed's latest set of economic projection showed somehow downward revision on the growth outlook. The mildly lower growth outlook did not tamper the expectations of an earlier rate hike schedule with the members raising their median estimate for the Fed funds rate, as the dot plot shows, to 1.375% at the end of 2015 from 1.125% forecasted in June.
Technically, dollar's strength is most apparent against the broadly weak yen as USD/JPY as recent rally accelerated to as high as 108.68 so far. EUR/USD took out last week's low of 1.2859 and reached as low as 1.2834 so far. USD/CHF also took out last week high of 0.9395. GBP/USD was relatively much more resilient and is held well above 1.6161 minor support. The dollar index rose to 84.78 so far and breached 2013 high of 84.75. Near term outlook stays bullish as long as 83.86 support holds. Firm break of 84.75 will resume the whole up trend from 72.69 to 61.8% projection of 72.69 to 83.75 from 78.90 at 86.35.
There are two key events for the rest of the day. The first one is SNB policy decision. The central bank is expected maintain the EUR/CHF floor at 1.2. The main question is whether SNB would cut interest rates into negative territory in response to recent stimulus launched by ECB. Some economists argued that there could be a -10bps or -15 bps cut targeting only non-residents. Raising the 1.2 floor is an option but is seen as impractical. Nonetheless, more analysts expected SNB to stand pat and wait-and-see.
Another key event is the Scottish independence referendum. Latest poll by YouGov showed the "Yes" camp had a 52% to 48% lead excluding undecided respondents. On the other hand, another poll by Survation showed "No" led by six percent points. Ipsos-Mori poll showed "No" led by 51-49%. Result is expected early on Friday morning.
Elsewhere, New Zealand GDP rose more than expected by 0.7% qoq in Q2. Japan trade deficit narrowed to JPY -0.92T in August. Swiss trade balance, UK retail sales and CBI trends orders will be released in European session. US will release jobless claims, housing starts and Philly Fed survey.