Market Review - 20/08/2014 23:01GMT
U.S. dollar rises broadly after FOMC minutes showed mildly hawkish bias
The greenback rose broadly against the major currencies on Wednesday after the release of FOMC minutes. U.S. dollar strengthened to a 4-1/2 month high at 103.85 versus the Japanese yen whilst euro fell to a near 1-year low at 1.3256 against U.S. dollar.
The FOMC minutes of its last July 29-30 policy meeting released on Wednesday showed 'labor market conditions had moved noticeably closer to those viewed as normal in the longer run; policymakers "generally agreed" that improvements in the labor market over the last year had been greater than expected.' The minutes also showed officials had largely agreed on many elements of a framework for raising interest rates, with almost all policymakers agreeing it would be appropriate to retain the overnight federal funds rate as their key target.
The British pound fell to 1.6602 at European open on Wednesday, however, cable jumped up to 1.6680 in European morning on short-covering after the release of hawkish BoE minutes (where 2 members voted for a 25 bps rate hike) , however, renewed selling interest below there knocked price lower and the pair fell to a fresh 4-month low at 1.6589 in New York after the release of FOMC minutes. On the data front, UK CBI trends came in at 11 versus forecast of 4 n previous reading of 2.
The BoE minutes stated 'MPC voted 7-2 in Aug to keep interest rates unchanged, Weale and McCafferty backed 25 bps hike; Weale and McCafferty said desirable to raise rates before wage pressures show due to monetary policy lags; Weale and McCafferty said early rate rise would facilitate aim to ensure future rate rises are gradual; most MPC see insufficient inflation pressures to justify rate rise; most MPC see merit in waiting for firmer evidence that wage growth will come before raising rates; most MPC fear unexpected rate rise could push up sterling, further impede UK economic rebalancing; potential overreaction by markets not necessarily a reason to delay rate rise if merited by data; most MPC expect downside risks of raising rates to diminish over time; current monetary policy operational framework under review, can be used to implement rate rises in near term.'
Thursday will see the release of Japan's manufacturing PMI, China's HSBC manufacturing PMI, Swiss trade balance, France's Markit manufacturing and service flash PMI, Germany's Markit manufacturing flash PMI, eurozone's manufacturing and service flash PMI, U.K. PSNCR and retail sales, U.S. jobless claims and Markit manufacturing PMI, eurozone consumer confidence, U.S. Philly Fed business index and existing home sales. The 3-day annual Federal Reserve Bank symposium held in Jackson Hole, Wyoming begins on Thursday.
U.S. dollar rises broadly after FOMC minutes showed mildly hawkish bias
The greenback rose broadly against the major currencies on Wednesday after the release of FOMC minutes. U.S. dollar strengthened to a 4-1/2 month high at 103.85 versus the Japanese yen whilst euro fell to a near 1-year low at 1.3256 against U.S. dollar.
The FOMC minutes of its last July 29-30 policy meeting released on Wednesday showed 'labor market conditions had moved noticeably closer to those viewed as normal in the longer run; policymakers "generally agreed" that improvements in the labor market over the last year had been greater than expected.' The minutes also showed officials had largely agreed on many elements of a framework for raising interest rates, with almost all policymakers agreeing it would be appropriate to retain the overnight federal funds rate as their key target.
The British pound fell to 1.6602 at European open on Wednesday, however, cable jumped up to 1.6680 in European morning on short-covering after the release of hawkish BoE minutes (where 2 members voted for a 25 bps rate hike) , however, renewed selling interest below there knocked price lower and the pair fell to a fresh 4-month low at 1.6589 in New York after the release of FOMC minutes. On the data front, UK CBI trends came in at 11 versus forecast of 4 n previous reading of 2.
The BoE minutes stated 'MPC voted 7-2 in Aug to keep interest rates unchanged, Weale and McCafferty backed 25 bps hike; Weale and McCafferty said desirable to raise rates before wage pressures show due to monetary policy lags; Weale and McCafferty said early rate rise would facilitate aim to ensure future rate rises are gradual; most MPC see insufficient inflation pressures to justify rate rise; most MPC see merit in waiting for firmer evidence that wage growth will come before raising rates; most MPC fear unexpected rate rise could push up sterling, further impede UK economic rebalancing; potential overreaction by markets not necessarily a reason to delay rate rise if merited by data; most MPC expect downside risks of raising rates to diminish over time; current monetary policy operational framework under review, can be used to implement rate rises in near term.'
Thursday will see the release of Japan's manufacturing PMI, China's HSBC manufacturing PMI, Swiss trade balance, France's Markit manufacturing and service flash PMI, Germany's Markit manufacturing flash PMI, eurozone's manufacturing and service flash PMI, U.K. PSNCR and retail sales, U.S. jobless claims and Markit manufacturing PMI, eurozone consumer confidence, U.S. Philly Fed business index and existing home sales. The 3-day annual Federal Reserve Bank symposium held in Jackson Hole, Wyoming begins on Thursday.
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