Bottom of the 9th, the scores are tied. It’s time for the big one.

The day is finally upon us for the September FOMC meeting during which the market is expecting Ben Bernanke and other members of the committee to engage in some form of additional policy easing. The make-up of what the Fed will go for is very much up for discussion and the structure of the easing is of course key. This will verge between outright purchases of US government debt (dollar negative) to a mere extension of guidance as to the path of interest rates remaining ultra-low (dollar positive). We are looking for a combination of both and hence our beliefs that USD remains sold through Q4 as investors once again get into risky assets and carry trades, using the dollar as a funding currency following the assertion that rates will stay ultra-low and accommodative through into 2015.

The announcement is due at 17.30 BST with a press conference from Ben Bernanke at 19.15 BST to explain the FOMC’s decision.

Elsewhere, the German Constitutional Court ratified the European Stability Mechanism. With the ratification came conditions however, and the Court stipulated that there should be a cap on how much the German taxpayer can be on the hook for, which is said to be around EUR190bn.

While the decision has averted any immediate disaster this merely brings us back on line with the general trend of gradual, painstaking improvement in the Eurozone. In lockstep with the ECB’s decision to go out and buy bonds these verdicts do have the ability to fix the Eurozone but only in time.

The economical will is there, the political will has been shown to be there, but all of this will grind to a halt if the peripheral nations do not request aid. Draghi was clear that it is a pre-condition for buying of their debt and so while the market is acting relieved, hurdles remain to be jumped.

EURUSD kicked higher on the news and moved above 1.29 while the generally better sentiment also took GBPUSD above 1.61 for the first time in 4 months. Pre-FOMC we are unlikely to see too much movement with most happy to sit on their hands. There is always the prospect of some squaring flows but little volatility is expected.

Overnight the Dutch elections have caused few ripples with the VVD party being returned with the most seats, closely followed by the Labour party. Coalition agreements will be hammered out over the coming few days and this will equate to little currency reaction.

With the event risk that the FOMC poses tonight we would err on the side of caution today and cover off any outstanding USD purchases required for short-term needs. If the Fed were to disappoint later, GBPUSD will be below 1.60 before you can say “missed opportunity”.

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Latest exchange rates at time of writing