Fed Waiting for Better Data, China PMI Up Next

The FOMC statement indicated that growth had been slower than believed in the first half of 2013 but said it would pick up going forward. Officials also cautioned on inflation, something that could weigh against September tapering. Overall, the changes in the statement are unlikely to sway those hardened toward or against tapering but gains the gold and bond market suggest a slightly smaller chance of a Sept taper.

The main focus of the Fed and the market will continue to be economic data and there were three important data points in the lead-up to the FOMC announcement. ADP employment rose 200K in July compared to 180K expected, boosting the dollar to the highs of the day. The Chicago PMI was mostly overlooked but slipped to 52.3 compared to 54.0 expected.

The key release of the day was Q2 GDP but it featured benchmark revisions all the way back to 1929. The economy grew 1.7% in Q2, beating the 1.0% but first quarter growth was revised to 1.1% from 1.8%. The takeaway is that growth has been slow this year but could be accelerating however there were numerous caveats from the report on either side of the debate. Again, it adds to the focus on upcoming data.

The Australian dollar is stuck in a technical black hole and falling deeper. AUD/USD broke below 0.9000 to a fresh three-year low at 0.8927 in early Asia-Pacific trading. A series of second-tier releases from Australia may get some attention with the RBA so close but the main mover is the Chinese official manufacturing PMI at 0100 GMT. Expectations are for a 49.8 reading.