The just released BoE meeting minutes have shown MPC members to be in sync with their Governor’s outlook towards upbeat domestic economic and labour market conditions and that the central bank is in no rush to raise interest rates.
Across the Atlantic, the minutes of the Fed policy meeting will be eyed for closer insights into policymakers’ views on QE3 tapering, especially in the aftermath of the contrasting comments made by some FOMC members in recent days, particularly Charles Evans’s comment of $1.5 trillion of purchases under QE3. Also, important US economic releases will keep markets interested in the session ahead. In Germany, the prolonged negotiations for government formation have once again hit a roadblock with differences concerning labour issues.
Pound Sterling – UK Markets
While acknowledging the recent economic recovery, BoE policymakers voted unanimously to maintain the status quo regarding policy stance. Policymakers maintained that there were no major inflation risks, thus building a case for not raising interest rates immediately. The upbeat sentiment has nudged the pound upward in today’s trading session. Expectations of an earlier than expected exit strategy were building up, especially after Mark Carney hinted the same in last week’s quarterly inflation report. In this context, speeches by MPC policymakers Martin Weale and Spencer Dale will be keenly followed for further hints.
Meanwhile, Sterling searched for direction against the majors yesterday as mixed global economic cues kept investors on their toes throughout the day. While the OECD lowered its global growth forecasts for the current and following year, uncertainty surrounding the timing of the Fed’s asset purchase programme dampened market mood. In this context, Sterling investors will keep a tab on today’s FOMC meeting minutes for further direction.
US Dollar – US Markets
The US Dollar nudged lower against the Euro yesterday as investors remained cautious in the midst of Fed policy uncertainty. Outgoing Fed Chairman, Ben Bernanke, opined that the near zero interest rate will stay for a considerable period of time even if the unemployment rate drops to 6.5%, while also stating that there is further scope for both improvement in the labour market and inflation to move towards the central bank’s 2% target in the near term. Additionally, Charles Evans indicated that the benefit of stimulus far outweighs the risks and that the central bank will likely buy $1.5 trillion under its QE3 programme. Against this backdrop, today’s FOMC meeting minutes and speeches by policymakers will be closely followed by investors to gauge the mood of policymakers regarding tapering.
The greenback is trading range bound against the majors this morning ahead of a string of important economic events later today, including the consumer price inflation and retail sales report and the Fed minutes, which will influence trading sentiment in markets today.
Euro – European Markets
The common currency traded broadly higher against the US Dollar yesterday amid encouraging domestic economic data, even as the Fed’s QE3 uncertainty continues to underpin demand for the common currency at the cost of the greenback. The German ZEW economic survey pointed towards improved investor sentiment, which rose to its highest level in four years for November. Likewise, investor confidence in the Euro zone also climbed higher for November, pointing towards a pickup in economic activity in the latter half of the year. Meanwhile, ECB board member, Joerg Asmussen, has cautioned that policymakers need to be “very careful” while considering the use of negative interest rates to spur inflation and growth.
With little on the domestic economic calendar, the single currency is trading under pressure against the majors in today’s session. Market participants will closely track significant events unfolding in the US, particularly the minutes of the FOMC meeting later today. Also, the US consumer price inflation and retail sales numbers will determine movement in the Euro-US Dollar pair in today’s trading session.
Other Currencies – Highlights
The Swiss Franc has moved higher against the US Dollar after dovish remarks made by Fed officials including the Chairman, Ben Bernanke, regarding scaling back the central bank’s bond buying programme. The Fed Chairman’s comments have boosted risk sentiment in markets ahead of the release of the FOMC meeting minutes later today. Meanwhile, the ZEW survey of business conditions in Switzerland for November later today will keep investors in the Franc interested, ahead of tomorrow’s domestic trade data.
Apart from the domestic macro releases today, news flows emanating from across the Atlantic, including the FOMC minutes and the US consumer price inflation and retail sales data will prove crucial for the Swiss Franc against the greenback going forward.
British Pound Suffers Losses Ahead of Tuesday's Critical Vote