Investors delve into US Fed Committee meeting minutes
Market participants will finally get a peek behind the curtain when the Federal Reserve Open Market Committee’s (FOMC) September meeting minutes are released later today. They will be dissected in hopes of a better gauge of policymaker’s sentiment and what the landscape will look like going forward. The fact that 3 out of 10 voting members dissented against the final decision will make them an even more interesting read. Aside from this, the New York Federal Reserve (Fed) President, William Dudley, and the Kansas City Fed President, Esther George, are both scheduled to deliver speeches today.
In Britain, the RICS house price balance is up for release, and in the Eurozone, industrial production data for August is keenly awaited.
Pound Sterling – UK Markets
This morning, the Pound recouped most of its losses from the previous four sessions and suddenly jumped ahead of the US Dollar and the Euro. The upward movement came after a surprise announcement from the British Prime Minister (PM), Theresa May, that she will allow the Parliament to vote on her Brexit plan. This news proved to be a soothing tonic for the beleaguered Sterling as UK’s elected representatives will now be able to debate the British PM’s Brexit plans and potentially limit the prospect of a hard landing for Britain.
The recent plunge in the Pound came about because of concerns surrounding a so-called “Hard Brexit”, which could derail the British economy and limit its access to the single market. Sterling has been under scrutiny after last week’s “flash crash” which knocked its value down in a matter of minutes. On the data front today we will see the UK’s RICS house price balance data for September.
US Dollar – US Markets
The US Dollar is trading mixed against the Pound and Euro this morning. Market participants will have complete focus on the FOMC minutes, hoping for further light on the timing of an interest rate increase by the US Fed. At its September monetary policy meeting, the Fed kept its benchmark interest rate steady, with 3 members supporting a rise. Looking ahead in the week, traders will keep a tab on US advance retail sales along with Fed Chair, Janet Yellen’s speech.
The greenback strengthened against most of its major peers yesterday, as increasing hopes for a US Fed rate rise before the end of the year continued to lend broad support to the US Dollar. On the data front, the labour market conditions index slipped further into negative territory in September, raising doubts over the strength of the nation’s jobs market. In other economic news, small business optimism index in the US surprisingly dropped during the same month.
Euro – European Markets
The shared currency is trading lower against its major peers this morning. Data released earlier in the session showed that German wholesale prices advanced above expectations in September. In contrast, French consumer prices dropped during the same month, following a decline in food and some
tourism-related service prices. Inflation in the Eurozone’s second largest economy has long been running below the European Central Bank’s 2.0% target, despite the bank cutting interest rate to record lows. The Euro region’s industrial production data is scheduled to release shortly and is expected to record a rebound for August.
Yesterday, the Euro ended lower against the greenback, touching its lowest level since late July amid increased bets that the US Fed will raise interest rate this year. On the data front, the ZEW survey of investor sentiment showed that the mood among German investors improved more than expected in October. The current situation index for the nation also rose during the month, and the economic sentiment in the Eurozone surged.
Other Currencies – Highlights
The Japanese Yen is trading on a weaker footing against the greenback this morning. Earlier in the session, the Bank of Japan’s (BoJ) policymaker, Yutaka Harada, and the central bank Governor, Haruhiko Kuroda, pledged to expand stimulus measures, but only if sudden changes in the global economy threaten the achievement of Japan’s inflation target. However, during his speech, the BoJ Governor did not make any direct reference to the need for reaching the central bank’s inflation target quickly.
On the economic release front, Japan’s core machinery orders, a leading indicator of business investment, dropped for the first time in 3 months in August due to sluggish growth back home and abroad. Further, the nation’s Eco Watchers current index declined, while the outlook index registered an advance for September. Separately, Japan’s trade surplus narrowed in August, and its current account surplus widened for the third consecutive month as imports fell due to lower crude oil prices and a firming domestic currency.