Big day today with the FOMC announcing in the early European evening – 7pm London. Obviously no one’s expecting rate hikes, but any new nuance in the committees views on the US economy will give us all further insight into the proximity of the exit strategy. The fireworks – if any – may not actually occur until Friday though, as we then get non-farm payrolls. I could easily see a scenario where the comments today are conditional on further strength in US data, and then, lo and behold, on Friday we get employment numbers that are far in excess of expectations. For what it’s worth, consensus for Friday is for a 6.1% unemployment rate and 233,000 for non-farm payrolls. Imagine a scenario where the unemployment rate is 5.9%, or the non-farm payrolls number is over 350,000? It doesn’t take much to get those sorts of numbers, but trust me… the reaction is likely to be big!

Asian equity markets seem to have reached over-extension territory. At the very least the bullish momentum seems to have run out for now. In all probability this is caution in front of the big data that’s coming our way. Let’s not kid ourselves, if the reaction is negative in European and US markets, Asian markets will follow. The one constant appears to be dollar strength. Cable is near the lows, EUR/USD is just pips away from attaining a 1.33 handle, the USD/JPY bullish run continues, and the pair is approaching the first target around the 102.25 level. And those are the majors I’ve mentioned…. Emerging market currencies fared even more poorly against the dollar, as traders switched to protection mode, or added to bullish dollar bets.

I don’t anticipate we’ll get much excitement during the European day as caution is likely to be the main theme. This might not be the right time, but more and more, as we see these big data events approaching, there will be more fear than greed at play. It’s musical chairs guys, and we all know the music is about to stop, everyone’s still pretending to dance but we’re all edging closer to the chairs. No one wants to be the one left standing when the music stops! No one wants to be long carry when the massive carry unwind begins…