Eyes on the FED, will the USD Extend Gains versus the Euro, NZD

Traders will be watching today's FED policy announcement. Meanwhile, the performance from the NASDAQ and S&P 500 is decent, suggesting that market participants are positive of better big tech earnings. This may subsequently lift the stock market and the USD since investors have reasons for channeling their funds into US equities. The higher there are FX and equities inflow, the firmer the greenback, a development that may see the NZD and Euro retrace.

Details: 

Jerome Powell will highly remain tight-lipped on tapering bond purchases and leave fund rates constant because it is simply too early to call. However, if there is a shift in wording, although he will be optimistic, predicting an acceleration of the United States economic recovery, the USD may print higher even if the upcoming GDP report may turn negative. In Q4 2020, Coronavirus caseload rose in the US while retail sales fell during that period. A resurgent USD will pound the fragile Euro whose data have surprised to the downside. The German IFO report printed lower than expected, pointing to pessimistic German businesses, contrasting central bankers and purchasing managers who expect the Eurozone market to rebound in the next two quarters.

Impact on the USD: 

Bullish. Comments from the FED's chair may provide the required tailwinds for the USD as it seeks to rewind losses of 2020. This will portend further losses for the Euro and major currencies like the NZD that reported their first coronavirus case after months.

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