Inflation in Australia fell below expectations in Q2. CPI came at 0.2% in the second quarter, undershooting 0.4% forecast and Q1 figure at 0.5%.

Australian dollar was down around 60 pips against US dollar in Asia, after data release.

Deeper pullback of AUDUSD pair looks more likely after the price broke below initial support at 0.7900 and dented last week’s low (also congestion low at 0.7875, however, the greenback remains vulnerable ahead of FOMC that may help Aussie and limit losses.

UK preliminary Q2 GDP is the key release of the European session. The figures for the Q2 UK GDP are expected to have accelerated to 0.3% q/q versus 0.2% in Q1, while on annualized basis, the pace of expansion seems to have eased to 1.7% versus 2.0%.

Sterling is standing at the back foot against the dollar in early Wednesday’s trading, following strong upside rejection on Tuesday, but downside remains so far protected by psychological 1.3000 support, ahead of UK GDP data and FOMC verdict.

UK Q2 GDP release is due at 08:30 GMT.

Key event today is the FOMC meeting. The Fed is widely expected to stay unchanged on its July’s meeting, with focus on the statement, as there will be no press conference after the end of FOMC two-day meeting today.

The Federal Reserve is expected to hold interest rates unchanged on Wednesday and possibly hint that it will start winding down its massive holdings of bonds as soon as September in what would be a vote of confidence in the U.S. economy.

That would mark another pause in the monetary tightening campaign that the Fed began in December 2015. The central bank has raised rates twice this year, including at its last policy meeting in June.

There is a little chance the Fed will announce the start of relaxing its $4.5 trillion balance sheet today, however, it may provide more hints on when that might occur in its policy statement.

Market participants expect the Fed to wait until the big September meeting to make an announcement on ‘quantitative tightening’.

Fed interest rate decision and statement will be released at 18:00 GMT.

Another important event today is US weekly crude stocks. Crude oil price rose strongly during past two days and hit eight-week highs. Fresh bulls were sparked by announcement from Saudi Arabia about plans to limit its crude exports in August.

Oil prices remain firm on Wednesday on expectations of further drawdown in US crude inventories and signs of slowing of rising US shale oil production.

Draw of 2.6 million barrels in US crude stocks is forecasted for today vs 4.7 million barrels draw last week.
Release is due at 14:30 GMT.