IMF forecasts Uk growth of 3.2%

Today's Highlights

German Industrial production falls

IMF forecasts Uk growth of 3.2%

FOMC minutes this evening the highlight

FX Market Overview

It was a quiet day on the foreign exchanges with little data of note released. The Euro did moderate a little after it was reported that German Industrial Production dropped 4% from July to August which is the biggest decline since the financial crisis in early 2009. This , in conjunction with the poor factory orders figure on Monday suggest that the sector may be in decline and must be worrying for policy makers. Germany has been the driving force behind what little growth we have seen in the Eurozone and their slowing economy will no doubt increase calls for added stimulus from the ECB. The Euro should continue to lose ground in the current climate.

In the UK Industrial production came in flat yesterday and manufacturing is still way below its pre-crisis peak , however the Pound was buoyed by a report from the International Monetary Fund which said that Britain will be the fastest growing major economy in the developed world this year. The IMF forecast growth of 3.2% in Britain in 2014 outstripping the rest of the G7 including the United States , France and Germany. They also warned that interest rates may have to rise quickly if inflation or the housing market ran out of control. In quiet markets this was enough to propel the Pound off the recent lows and back above the psychologically important 1.600 level versus the dollar. For now this move is simply corrective in nature and we should consolidate around current levels while traders wait for the next catalyst.

Dovish comments from Fed officials overnight helped to weaken the dollar ahead of the FOMC minutes due for release later this evening. The Fed's Dudley said that "It is still premature to begin to raise interest rates" and Kocherlakota commented that " just because unemployment is falling it is not a reason to raise rates". Dudley did concede that rate hikes were likely in mid 2015. The minutes will be very closely scrutinised for any discussion around the timing of interest rate hikes or the merits of adjusting forward guidance. Given the current correction any hints that there may be a change to the "considerable period" language would have a bigger effect and the dollar could benefit.

So a very quiet day ahead as markets await the minutes from the latest Federal Reserve meeting. Until then expect currencies to remain in their current ranges.