Forex: Wednesday’s review

Yesterday the dollar fell to the weakest level in a month against the euro after the Federal Reserve extended its pledge to hold its target for the federal funds rate low until late 2014 amid a “highly accommodative” monetary policy. The central bank had previously pledged to keep its rate target in place until mid-2013. Nine of 17 Federal Reserve officials expect borrowing costs will remain below 1 percent at the end of 2014, with six officials expecting zero rates to remain into 2015. The projections by Federal Open Market Committee participants, released for the first time today in Washington, provide an unprecedented look at policy makers’ plans for the path of the benchmark interest rate, which has remained near zero since December 2008. An increase in 2014 would mark the first rise in the fed funds rate since June 2006. Policy makers also lowered their estimates for growth and inflation in 2012, a move consistent with their statement earlier today that interest rates will remain “exceptionally low” through at least late 2014.

The yen fell against most its major counterparts after the Ministry of Finance said Japan’s exports dropped 8 percent in December from a year earlier. The median estimate of 27 economists surveyed by Bloomberg News was for a 7.4 percent decline. The Japanese currency is viewed as a safe haven because the nation’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders.

EUR/USD: yesterday the pair rose, showed new month's high.

GBP/USD: yesterday the pair rose, showed new month's high.

USD/JPY: yesterday the pair gain and showed new high of 2012, but could not be kept above Y78.00.

On Thursday European data starts at 0710GMT with the GfK consumer confidence data from Germany, while France data at 0745GMT includes consumer confidence and also the quarterly industry survey. At 0800GMT, World Trade Organization Director General Pascal Lamy becomes the first main speaker out of Davos for Thursday, followed at 1030GMT by UK Prime Minister David Cameron. At 1300GMT,

German Chancellor Angela Merkel and Spanish Prime Minister Mariano Rajoy give a joint press conference after their meeting in Berlin. UK

data at 1100GMT sees the CBI Distributive Trades Survey. US data starts at 1330GMT with both the weekly Jobless Claims and also Durable Goods orders. The weekly EIA Natural Gas Stocks data is then due at 1530GMT, followed at 1600GMT by Kansas City Fed Production data and later, at 2130GMT by M2 Money Supply data.