All Eyes on the FOMC Monetary Policy Decision
Today, attention throughout the globe will be directed towards the US Federal Reserve’s (Fed) monetary policy announcement. The Federal Open Market Committee (FOMC) is widely anticipated to hold the benchmark interest rate steady, following the release of disappointing May nonfarm payroll figures. The central bank will also unveil an updated set of economic forecasts in addition to its regular post-meeting statement. The Fed Chairwoman, Janet Yellen, is also scheduled to hold a press conference as the closely followed two-day meeting comes to an end. In addition to this, a fresh batch of US economic data is also due for release today.
In the UK, the just released data showed that the ILO unemployment rate surprisingly declined to a record low level during the three months ended April. Meanwhile, in the Euro zone, investors look forward to the release of the region’s trade balance data for April.
Pound Sterling – UK Markets
The Pound has erased most of its previous session losses and is trading higher against its major peers this morning. The just out data showed that the UK’s unemployment rate fell to its lowest level in over a decade for three months to April. Meanwhile, the number of jobless claims in Britain also dipped in May. Further, average earnings excluding bonuses rose above expectations during the three months to April. Looking ahead, the Bank of England will release its decision on interest rates and the asset purchase facility tomorrow.
Yesterday, Sterling lost ground and reached a two-month low level against the US Dollar after recent polls showed an increasing likelihood that the UK would vote to exit the European Union in the upcoming referendum. Moreover, the Leave campaign received another shot in the arm after Britain’s largest tabloid newspaper threw its weight behind Brexit. Adding to the weak sentiment, Britain’s consumer price index printed below expectations and therefore halted an attempted recovery by the Pound.
US Dollar – US Markets
The greenback has trimmed its previous session gains and is trading lower against the Euro and the Pound this morning ahead of the highly anticipated US Fed’s interest rate decision, scheduled to be announced later today. A two-day meeting of the FOMC concludes today, wherein the Fed’s benchmark interest rate is widely expected to remain steady. Further, market participants are likely to examine the Fed’s monetary policy statement with a magnifying glass and will also pay close attention to the central bank’s latest economic projections report that would lay the groundwork for future action. In addition to this, there is a slew of economic releases lined up in the US today.
Yesterday, the US Dollar staged a solid comeback against most of its major peers after US retail sales advanced above expectations in May, with gas stations and online retailers being the biggest gainers and indicating that consumer spending will help boost the nation’s economic growth in the second quarter. Another report showed that prices for imported goods posted its largest four-year gain in May.
Euro – European Markets
The shared currency staged a minor recovery and has gathered pace against the US Dollar this morning. Data released earlier in the session showed that French consumer prices advanced in May, mainly led by an increase in fresh food prices and as petroleum product prices rose for the third month in a row. Going ahead, investors await the Euro zone’s trade surplus data for April, scheduled for release in some time, and is expected to post a slight fall.
Yesterday, the Euro ended mixed against the greenback and the Pound. On the data front, the Euro zone industrial output rebounded above expectations in April, recording its first increase in three months, indicating that the region’s modest recovery is moving in the right direction. The surge in industrial production was mainly led by a rise in the output of durable consumer goods. Moreover, the number of people employed in the Euro zone recorded an increase in the first quarter.
Other Currencies – Highlights
The Kiwi Dollar trimmed its losses and has turned positive against the greenback this morning. Later today, New Zealand’s first-quarter GDP data is scheduled for release and is expected to show a slight slowdown. In addition to this, the latest fortnightly Global Dairy Trade auction results are also due. Moreover, trading trends in the Kiwi Dollar – US Dollar currency pair will also be influenced by the US Fed’s interest rate decision, scheduled to be announced further in the session. Looking ahead, New Zealand’s monthly purchasing managers’ and consumer confidence indices prints will be released towards the end of this week.
Earlier in the session, the Kiwi Dollar traded lower against the US Dollar amid a broad-based strength in the greenback. On the data front, the Real Estate Institute of New Zealand reported that the value of homes in the nation advanced last month. Additionally, New Zealand posted a larger than expected current account surplus in the first quarter of this year.