FX round-up: Calm before the storm ensues as markets await Fed decision

Currency markets were fairly quiet on Tuesday, as traders opted to keep heir powder dry until Wednesday's economic and statement release from the Fed.

The dollar lost some ground against a basket of currencies with the dollar index trading 0.17% lower at 91.889 by 1610 BST.

On the data front, the US released building permits figures today that showed 1.3m new residential building permits were issued in August.

This did little for the greenback as as it traded relatively flat against all its counterparts.

Sterling was 0.23% higher against the dollar to 1.3525 by the London close, finding support in the 1.3469 area and resistance at 1.3537.

Cable has rallied over 3% since Thursday, following comments from the MPC that said provided the economy "follows a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations."

This was followed on Friday by comments from MPC member Gertjan Vilieghe who stated in a speech that, "The evolution of the data is increasingly suggesting that we are approaching the moment when the bank rate may need to rise."

The pound was also said to have gotten some lift from unconfirmed rumors that Foreign Secretary Boris Johnson may resign following a report in The Telegraph. This was later rebutted by the Foreign Secretary himself .

"Markets seem to be thinking that (Boris resigning) would leave (Prime Minister) Theresa May with a freer hand to push through a softer Brexit," said Richard Wiltshire at ETX Capital in London, which he said would be a "positive" for sterling.

Against the euro, sterling had a lacklustre day, trading flat by the London close to 1.1293, after hitting a day low of 1.1237 in early trading.

Data out from Germany showed an increase in the six month forecast for economic sentiment, with the ZEW survey coming in at 17, beating expectations of 12.3.

The single currency traded 0.12% higher against the dollar in Tuesday's trading, taking it to 1.1969, unable to break above 1.2000 in earlier trading.

Housing starts were up in the US by 1.18 million as well as month on month import prices which came in 0.6% higher in August.

USD/JPY traded flat on the day at 111.57, while fellow safe-haven the Swiss franc also traded relatively flat at 0.9636, unable to trade above resistance at 0.9644.

USD/CAD has been range bound since Monday, unable to break below 1.2269 or above 1.2310.

News releases were thin on the ground on Tuesday, as traders seemed to be paying some attention to US President Donald Trump's speech at the UN were he dealt harsh criticism to North Korea, Venezuela and Iran.

All eyes will be firmly fixed on the FOMC statement and press conference on Wednesday, starting at 1900 BST, where analysts widely anticipate Fed policymakers to announce a lowering of monthly bond purchases starting in October when their two-day meeting ends.