The euphoria in equity markets continues to highlight the continuation of the US Federal Reserve’s massive bond buying programme at least until next year, even as the US economy finds its footing, following last month’s partial government shutdown. Outgoing Fed President, Ben Bernanke’s speech later tonight is also expected to further propagate a similar view, thereby leaving the fate of QE to his successor, Janet Yellen who will assume office early next year.
At home, all eyes are set on tomorrow’s minutes of the BoE meeting to ascertain the central bank’s future policy stance. In the Euro zone, forward looking sentiment indices will present a clearer picture of the region’s recovery in the near term.
Pound Sterling – UK Markets
In a rather lacklustre trading session, the Pound nudged lower against the majors yesterday. With no domestic economic data to trigger risk appetite, Sterling investors tracked comments made by central bankers from the US and the Euro zone. Meanwhile, a survey published by the BoE has revealed a correction in Britain’s housing prices as the fastest-growing risk cited by the nation’s banks. However, in the midst of the recent buoyancy seen in the British economy, data from OECD confirmed that UK is the fastest growing economy in the developed world.
Sterling is trading in a tight range against its peers in today’s trading session in the midst of another day of little domestic economic activity. Later today, important macro releases from the Euro zone and speeches from across the Atlantic will be eyed by investors for further direction. Tomorrow’s minutes of the latest BoE policy meeting will be closely followed by market participants for hints on policymakers’ take on the largely improving economy and labour market conditions, especially following last week’s comments made by Mark Carney on bringing forward the interest rate hike expectations.
US Dollar – US Markets
Although, dovish comments from the Fed’s incoming Chair, Janet Yellen seems to have sealed hopes of the central bank pursuing an accommodative stance, conflicting voices from Fed’s policymakers continue to highlight uncertainty regarding the future monetary policy. Seemingly hawkish views expressed by the New York Fed President, William Dudley, a noted dove in the FOMC, has once again cast aspersions over the stance that the Fed will pursue. In contrast, the Philadelphia Fed President stated that the domestic economy, especially the labour market, has shown enough strength for the Fed to start winding up its asset purchase programme. In the midst of simmering doubts about the future course of monetary policy in the US, the greenback managed to hold ground against the single currency in yesterday’s session.
However, the greenback has moved lower against the Euro this morning ahead of the Fed Chairman, Ben Bernanke’s speech tonight where it remains to be seen whether the outgoing central bank chief will underpin the need for stimulus measures to support the US economy. However, all market attention is centered on tomorrow’s FOMC meeting minutes for further direction to risk appetite.
Euro – European Markets
The common currency moved higher, albeit in a tight range, against the majors yesterday as lack of decisive triggers capped the Euro’s nascent gains. In a timely boost to the currency bloc’s fragile economic recovery, yesterday’s trade data showed that the Euro zone’s trade surplus widened more than expected for September, on the back of rising exports and near flat imports. Meanwhile, Germany’s central bank, in its monthly report, indicated a possibility of the German economic recovery gaining further traction in the coming months. Meanwhile, the ECB Governing Council member, Ewald Nowotny, has opined that although economic conditions in the Euro zone have improved over the past few months, more work remains to be done.
The Euro is trading range bound against its peers in today’s session as investors remain cautious ahead of the release of important German sentiment indices later today. Additionally, a speech by the US Fed Chairman later tonight will prove crucial for the Euro-US Dollar pair in the session ahead.
Other Currencies – Highlights
The Australian Dollar has climbed sharply against its counterparts this morning despite the minutes of the RBA meeting hinting at the possibility of further rate cuts if necessary to support the economy. The RBA board members also deemed the Australian Dollar to be “uncomfortably high” and believed that the economy was performing well below par, while also acknowledging that earlier rate cuts have supported the economic activity. The Aussie Dollar remained supported against the greenback as expectations of the Fed’s ultra loose monetary policy to continue well into the next year pressurized the US Dollar.
With little on the domestic economic calendar today, investors in the Australian Dollar will track news flows emanating from both sides of the Atlantic for further direction. Meanwhile, market participants will keep a close tab on speeches by the RBA Governor and assistant Governor during the course of the week for further insights into the central bank’s outlook towards the economy.
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance
Soft CPI Data, Lack of Progress in Brexit Talks Hurt Pound Sterling
Strong Labour Market Data from UK Lift Pound Sterling