Fed language changes but 'considerable time' remains in the statement

United States Dollar:

UK data released yesterday morning didn’t have much of an impact on the pound. It showed that wage growth picked up with earnings growing faster than inflation again whilst the rate of unemployment remained unchanged at 6%. The Bank of England MPC minutes were also released but the voting hasn’t changed, showing that policy makers voted 7-2 to keep interest rates on hold. GBP/USD ticked along close to and above 1.57 but as the day went on and we got closer to the much anticipated FOMC statement, it started to fall. The Fed left the phrase “considerable time” in the statement. A CNBC report sums it up quite nicely: “though the statement remained in, the context changed. Instead of dropping the language, it offered a softening of the tone that indicated it was still prepared to hike, though perhaps not as close as the market anticipated.” The change in language saw the greenback strengthen and GBP/USD fell to a low of 1.5584. The Fed’s growth forecasts were pretty much unchanged but they did lower their predictions for inflation. This came after US inflation data - released earlier in the day - showed that US CPI declined 0.3% in November vs. expectations for a fall of 0.1%, due in large part to the fall in gasoline prices. GBP/USD remains on the back foot this morning and trades at 1.5585.

Euro:

The dollar is firmer across the board this morning, with EUR/USD down to 1.2320. It dropped to a low of 1.2280 overnight following the Fed statement. Meanwhile the headlines surrounding Russia continue to flow and the volatility continues to be felt throughout emerging markets and across rates. In fact the rouble is strengthening this morning in advance of a Putin press conference. The factors influencing the euro currently seem to be largely external and that’s likely to be the case in the run up to the end of the week too. Meanwhile, the euro has weakened vs. GBP and GBP/EUR opens this morning at 1.2685.

Aussie and Kiwi Dollars:

The FOMC statement was the dominant headline yesterday and both AUD/USD and NZD/USD snapped lower following the event. The kiwi has recovered though, mainly in response to stronger than expected Q3 GDP which printed at +1.0% vs. expectations for +0.7%. NZD/USD opens this morning in London at .7740 having dipped to a low of .7680 overnight. Commodities have also bounced a little over the last 24 hours too and this has supported both currencies – oil and gold are both higher this morning.

Date Releases for the next 24 hours:

AUD: No data
EUR: German Ifo Business Climate
GBP: Retail Sales m/m
NZD: Visitor Arrivals m/m, ANZ Business Confidence, Credit Card Spending y/y
USD: Unemployment Claims, Flash Services PMI, Philly Fed Manufacturing Index