BoE, ECB and US Fed in Limelight Today
The session ahead will see central banks of major economies drawing a lot of market attention, starting with the Bank of England’s interest rate decision. Markets will be mostly concerned about the voting pattern of the MPC rate setting committee and the tone in the BoE minutes which will accompany today’s rate announcement.
The UK central bank’s decision will be followed shortly after by the publication of minutes of ECB’s September meeting. The minutes could impact the Euro, if the central bank confirms recent speculation about expanding its asset purchase programme in the coming months. Finally, the spotlight will be on minutes of the previous month’s FOMC meeting for detailed insights on what conditions led to the Fed delaying its decision to raise interest rates in September.
Pound Sterling – UK Markets
The Pound is trading in a close range against the US Dollar this morning. The direction in the currency pair later in the session will largely depend on the tone of the minutes of today’s Bank of England’s meeting and the US Fed’s September meeting, which are scheduled for publication today. The BoE’s interest rate decision for the current month will hit the wires in a few hours, with markets widely favouring no change in policy and a repeat of last month’s 8-1 vote to hold the benchmark interest rate at a record low. The minutes of the monetary policy meeting will be published alongside the announcement and would draw significant market attention to gauge the policy setters tone. The minutes are likely to carry a cautious tone in the wake of recent batch of news flow from the UK economy, especially the slowdown in the service sector which was highlighted in a survey report last week.
Sterling climbed to multi week highs against the greenback yesterday after UK industrial production for August surpassed expectations by a wide margin.
US Dollar – US Markets
The US Dollar has gradually commenced its downward spiral against the shared currency this morning, ahead of the release of minutes of the FOMC's September meeting as currency traders await further cues on when the US central bank intends to raise its benchmark interest rate. At the meeting, the Fed had voted in majority to leave the rate unchanged at a near-zero level citing that the recent turmoil in global financial markets could potentially restrain the nation’s economic activity and likely put further downward pressure on inflation in the near term. The monetary policy statement was widely interpreted as very dovish and put into question a rate rise in 2015. However, many Fed officials have delivered hawkish comments since then, giving rise to speculation that the Fed’s decision to delay raising rates in September was a close call. Today, minutes from the FOMC’s September meeting might shed light on the arguments and provide cues on chances of a rate rise in December.
Prior to the minutes, the latest weekly update on jobless claims will be tracked closely for cues on the strength of the US labour market.
Euro – European Markets
Earlier today, the Euro began to partly regain lost ground against the Pound and the US Dollar. Also, the single currency was unperturbed against its key peers even after the release of disappointing German trade balance data earlier in the day. Data revealed that German trade surplus narrowed more than market expectations for August as the nation’s exports posted its sharpest decline in almost seven years. In separate data, Germany’s current account balance showed a surplus which was well below market forecasts in August. The decline witnessed in the German indicators today suggests that growth prospects for Europe’s largest economy have worsened, primarily due to weakening global trade amid concerns of slowing growth in China and other emerging markets.
Ahead in the day, the European Central Bank will publish an account of its September monetary policy meeting which might offer additional insights in to the central bank’s views on the current uncertainty in global markets. Also, investors will look for signals for potential expansion of ECB’s aggressive easing measures in the near term.
Other Currencies – Highlights
The Swiss Franc is currently trading on a firmer footing against the US Dollar, amid broad based weakness in the greenback ahead of the publication of minutes of US Fed’s latest monetary policy meeting. The minutes are anticipated to offer further clarity as to why the US central bank decided to delay an interest rate rise in September and provide fresh hints about Fed’s future course of policy action. Meanwhile, employment data released earlier today in Switzerland indicated that the nation’s seasonally adjusted jobless rate rose to 3.4% in September, at par with market projections. The non-seasonally adjusted unemployment rate remained steady, meeting market expectations for September. However, the downbeat unemployment data in Switzerland had little influence on trading in the home currency against the US Dollar, amid fresh demand for safe havens such as the Swiss Franc.
Apart from the FOMC meeting minutes today, investors will also eye the latest weekly update on the number of people who filed to seek unemployment benefits in the US for further direction.