The US dollar is broadly mixed as attention turns to the FOMC statement later today. The most important development has been the unexpectedly large oil inventory build reported by the API ahead of today’s government estimate.  

The 11.4 mln barrel build is the largest in nearly two decades. To put the rise in perspective, consider that the US output is around 9.2 mln barrels a day. The news keeps the price of crude volatile, and yesterday’s $1.10 increase in the March light sweet contract has been completely unwound today.  

This is turn has weighed on the oil-sensitive currencies, like the Canadian dollar and Norwegian krone. The US dollar recorded an outside down day against the Canadian dollar. It traded on both sides of Monday’s range and finished the North American session below Monday’s lows. While this is often a seen as a bearish technical development, the retreat in oil prices has sapped the interest in follow through selling. There is near-term scope for the greenback to test the CAD1.4200 area. 

However, the weakest major currency today is sterling. It is off  0.4%.Some are linking sterling’s decline to the poor performance of its equity market, and in particular, the materials sector (-2%) and financials (-1.2%), though, in the declining session, the FTSE is faring the best among the markets. Perhaps it is best understood in the context of yesterday’s strong gain.  It posted an outside up day against the dollar, but here too there was not follow through buying.  Support is seen in the $1.4240-$1.4270 area, with a break signaling a return toward yesterday’s lows near 1.4175. 

The euro reached its best level against the Swiss franc yesterday since the SNB lifted its cap on the franc in the middle of  January last year.  Although the euro is holding well above CHF1.10 today, there has not been any follow-through gains. There is some confusion in the market as to what is fueling the franc weakness. The is some speculation that the SNB could be pushing the franc lower to prepare for additional ECB easing in March.  It is difficult to confirm the talk, but next week’s sight deposits will provide some clues.