Morning Forex Review, 02/08/2012

After yesterday's FOMC decision to leave policies unchanged all eyes are on the ECB and BoE ahead of the respective interest rate decisions. While no changes are expected or forecast by economists, it has highly probable that BoE Governor Mervyn King will extend the Quantitative Easing program in an effort to lift the U.K. out of recession. ECB President Mario Draghi faces a tougher situation as he is forced to back up his comments from last week with actions. Stock indices closed mixed as the FTSE 100 rose 1.38% followed by a 0.91% climb in the French CAC 40. The Spanish IBEX and German DAX both closed lower, weakening -0.27% and -0.26% respectively. EURUSD fell dramatically back below 1.23 after the FOMC, trading now at 1.2245.

Asian indices are trading mostly higher as speculation grows that the ECB's Mario Draghi will "pull off the gloves" and offer to restart the bond buying program. Oil which rebounded slightly yesterday following inventory figures from the U.S. has slid to $88.83 per barrel as weakening demand from Asia offsets the drop in stockpiles. Copper has gained slightly as expectations of further central banker action remains high. Meanwhile, 400 million people in India remain without power in one of the worst blackouts in witnessed by the nation. The government has pledged further infrastructure investment as a fix. Major indices remain mixed as the Nikkei outperforms, rising 0.32% followed by a 0.15% gain in the Australian ASX. The Hang Seng is weaker however, tumbling -0.39%.

As was widely expected by a survey of economists, the Federal Reserve chose not to amend its language and made no hints at further Quantitative Easing. The Fed did pledge support in the event that the need becomes more urgent, but is deferring further action. The immediate impact was felt in the equity markets losses. Stocks are also grappling with execution problems as algorithms go wild and generate massive price swings. All major indices closed lower, led by the -0.66% slide in the Nasdaq. The S&P 500 lost -0.30% while the Dow Jones ticked down -0.29%. On the back of yesterday's announcements the dollar has gained ground, with the dollar index climbing back above 83 to 83.014. Corn futures are also moving higher, rising 0.22% to $802.250 per metric ton.