The July FOMC meeting minutes showed that the committee has almost reached an agreement regarding quitting the easing policies. Some members think the labour market is improving and inflation is rising, therefore suggesting that the Fed should raise interest sooner. These suggestions boosted the Dollar across the board, and its strength may continue in the midterm.
Gold waved up and down ahead of the Fed Minutes with uncertainty of conflicts in Ukraine and Gaza. However, after the minutes were released, it plummeted to $1287.8 per ounce and broke the $1292 support. We may need a little more time to see the confirmation of this bearish crossover.
Today was a big step towards the Bank of England raising the interest rate. According to the MPC August meeting minutes, two out of nine members in the committee supported raising rate by 25 bps. This is the first time since 2011 that this option has gained support. After the report, the Sterling surged 50 pips to 1.6670 against the Dollar. However, the pair then slid back to 1.66 after the FOMC meeting.
Euro/Dollar finally broke through the 1.33 integer level after the consolidation since the start of this month. Funds are being withdrawn from Europe as the economic outlook is pessimistic along with the Ukraine crisis. Growth is stagnating in the Eurozone with only 0.1% in Q2, while Germany experienced a 0.2% contraction. The 0.4% inflation level is a more worrying sign as it may mean that deflation is very close.
Asian stocks markets closed with little changes yesterday before the Fed meeting. The Shanghai Composite edged 0.23% lower to 2245. The Nikkei Stock Average closed flat. The Australian ASX 200 gained 0.19% to 5634, even though heavy weighted BHP Billiton dropped 4.1%. In European stock markets, the FTSE fell 0.35%, the German DAX lost 0.21%, and the French CAC Index fell 0.32%. U.S. stocks rallied slightly after the Fed minutes. The Dows gained 0.35% to 16979. The S&P 500 edged 0.25% higher to 1986 near record high, while the Nasdaq Composite Index was down 0.02% to 4526.
On the data front, China HSBC Flash Manufacturing PMI will be released at 11:45 AEST. Eurozone PMI data will also be out today at the beginning of European session. UK’s Retail Sales will be at 18:30 AEST. Also, we have U.S. Unemployment Claims at 22:30 AEST and Existing Home Sales at midnight.
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EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
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