Chris Turner, the head of FX strategy at ING, notes that  Fed Chair Jerome Powell said yesterday the Fed would be addressing last month’s tightness in U.S. money markets with a permanent addition of dollar liquidity – replacing several temporary open market operations currently underway. 

• "It seems this will involve the Fed buying T-Bills, perhaps worth in the region of US$200 billion. Powell was at pains to stress this was not quantitative easing. 
• A permanent addition of liquidity could have been taken poorly by the dollar and taken well by high yield FX, but it wasn’t. This because: (i) the programme will be a lot smaller than QE (which at its peak was worth US$85 billion per month), (ii) involves short term securities that can roll off the Fed’s balance sheet quickly and (iii) the market is witnessing very little progress in either US-China trade or Brexit negotiations. 
• Indeed, US-China relations seem to have deteriorated further, with the US now citing Chinese human rights abuses, in addition to the national security threat, as a reason to blacklist Chinese companies. For today, expect more tough rhetoric between the US and China ahead of tomorrow’s trade meeting. 
• Tonight also sees the release of September FOMC minutes. The Dot Plot already tells us there was much dissention over the 25 basis point cut, but poor US data since that meeting suggests it will take a lot to shake the market from its conviction (now 83% priced) that the Fed cuts again on 30 October. 
• Expect the dollar to stay bid against activity FX and we wouldn’t be surprised to see USD/CNH trading above 7.20."