Fed still delaying rate rises but up their forecasts

Today's Highlights

BOE watching wages growth

Fed still delaying rate rises but up their forecasts

Scotland decides

FX Market Overview

The day has arrived when we discover whether Alex Salmond's ego gets its own border patrol, whether Gordon Brown's career has actually be resurrected and whether David Cameron's intervention killed the Better Together campaign completely. The results are not due until early tomorrow morning but we will have a very volatile time in the interim as chaos theory has its effect.

The Bank of England minutes didn't reveal a lot but the Monetary Policy Committee's concerns over wage growth will have been allayed to some degree by the improvement in yesterday's data. The drop in unemployment claims will also have helped but I still think we are looking at mid-2015 before we are assailed by any interest rate hikes. I am writing this a little late today so I have already seen the UK retail sales data and it was a tad below expectations so the BOE has less to fret about once again. Sterling is generally quite well supported but tonight's events could change that dramatically.

Yesterday's other big news was the Federal Reserve's interest rate decision. They left the base rate on hold but we did get a forecast of the base rate going from the current variable 0.0%-0.25% and rising to 1.375% by the end of 2015. They reiterated their plan to exit from bond buying program by next month and made another $10 billion cut to that budget this month. Other than that, it is steady as she goes. Fed Chair, Janet Yellen speaks today so we will look for any further clues in that. In essence, the rest of the world heaves a sigh of relief every time the Fed leaves its base rate on hold. The flow of very cheap loans is driving growth in stock markets across the globe, so any increase in the cost of borrowing in the US will act to restrain share prices and investor activity.

We heard overnight that the pace of growth in the New Zealand economy slowed a little in the second quarter of the year but is still on the right trajectory. The Kiwi Dollar is a tad weaker though; hovering around that NZ$2.00 level but not really breaching it. This evening's jobs data may alter that. The forecast for job vacancies is not good. That would suggest some wage price inflation pressure and that ought to strengthen the NZ Dollar. Those seeking the magic NZ$2.00 may want to trade now as we are so close to that level and tonight's referendum result could cause a slump in the Pound. As a risk management technique, it has merit.

Away from the markets there are stories of giant spiders coming into homes for warmth during the Autumn months and of infectious mosquitoes crossing from the continent spreading Asian tiger mosquito can spread dengue fever and chikungunya; a fever which causes pain in the joints. To paraphrase the words of every stereotypical racist caricature 'I dunno; they come over 'ere, stealing our blood, spreading their foreign diseases.'

Quote

"The ultimate test of man's conscience may be his willingness to sacrifice something today for future generations whose words of thanks will not be heard."
Gaylord Nelson