As markets continue to wait the outcome of the Greek debt restructuring talks, attention yesterday turned to the US FOMC meeting. The euro had lost a little ground in yesterday morning’s trading as concerns that the ECB would have to take losses on its Greek bond holdings outweighed a stronger than expected German Ifo index. However, the dollar later fell to a five week low against the single currency after a more dovish than expected outcome from the FOMC.

Fed Chairman, Ben Bernanke, said the US central bank might consider further monetary easing through bond purchases while further delaying the timing of an eventual interest rate rise until late 2014, some 18 months later than previously forecast. The dovish Fed tone could well dominate forex markets today, especially as the economic calendar is mostly second tier data. Indeed, the euro starts the day back above $1.31 versus the dollar, up from yesterday’s intraday low of around $1.2930. Continuing short euro positions give scope for further euro gains though the currency still remains very vulnerable to concerns about the failure to resolve the eurozone debt crisis.

Against the yen, though, the dollar has failed to hold yesterday’s two month highs, seen after Tuesday night’s news of Japan’s first trade deficit since 1980, with dollar upside seen to have been pushed too far.

Meanwhile, sterling yesterday initially fell against the dollar, pressured by worse than expected UK GDP data, which showed the economy contracting by 0.2% in Q4 last year. Sterling, though, more than recovered these losses as the dollar weakened post the FOMC meeting.