We saw the pound trade at 1.5000 to the US dollar yesterday for the first time in 7 months following a warning from Bank of England member, Gertjan Vlieghe, that a stronger pound will have an unwanted impact on the UK’s inflation. Implementing monetary policy tightening is not yet an option, he said, given that the UK needs to stabilise before this can happen. Things didn’t stay at that rate over the whole day’s trading, as it would be, as new data from Chicago regarding its PMI levels and home sales indicted a softening. Looking at the Eurozone, GBP/EUR is being driven, for a large part, by talk of further QE for Europe – hope is now for some revelation on Thursday when the ECB meet to discuss policy.
In Europe, EUR struggled as yesterday as we saw German retail data come in below expectations (-0.4%) which now means it has dipped for 3 months on the trot. What this fall may reflect is a lowered aggregate demand which will worry the ECB. We also saw the Italians concerned when monthly CPI came in with one of the worst performances for 7 years.
We’ll see a slew of data from the ECB today which will fan the deflationary flames if they come in negatively. Thursday’s ECB meeting should be telling for the how monetary policy is going to pan out in the near future – they can take the decision to either continue with forward guidance, as they have been doing, or ramp up their QE efforts. There is also the chance that the deposit rate is lowered or widen the asset pool – getting the balance right (or wrong) will have implications for the struggling single currency.
Stateside, the seems a 66% chance, according to one of the Fed’s chief strategists, that we’ll see a rate hike on hike on that side before the year is out. Despite this uncertainty, including that from the Fed fund futures, USD hit an eight month high against its major competitors.
In terms of data today, we’ll see ISM Manufacturing PMI data, then on Thursday we’ll see Janet Yellen give testimony before Congress followed by important jobs data on Friday.
FC Exchange is a trading name of Foreign Currency Exchange Limited. Registered office: Salisbury House, Finsbury Circus, London, EC2M 5QQ. Registered No.5452483. Authorised by the Financial Conduct Authority (No.511266) under the Payment Service Regulations 2009 for the provision of payment services. HM Revenue & Customs MLR No.12215508. Copyright © 2013 Foreign Currency Exchange. All Rights Reserved.
Recommended Content
Editors’ Picks
EUR/USD retreats to 1.0750, eyes on Fedspeak
EUR/USD stays under modest bearish pressure and trades at around 1.0750 on Wednesday. Hawkish comments from Fed officials help the US Dollar stay resilient and don't allow the pair to stage a rebound.
GBP/USD struggles to hold above 1.2500 ahead of Thursday's BoE event
GBP/USD stays on the back foot and trades in negative territory below 1.2500 after losing nearly 0.5% on Tuesday. The renewed US Dollar strength on hawkish Fed comments weighs on the pair as market focus shifts to the BoE's policy announcements on Thursday.
Gold fluctuates in narrow range above $2,300
Gold struggles to make a decisive move in either direction and moves sideways in a narrow channel above $2,300. The benchmark 10-year US Treasury bond yield clings to modest gains near 4.5% and limits XAU/USD's upside.
SEC vs. Ripple lawsuit sees redacted filing go public, XRP dips to $0.51
Ripple (XRP) dipped to $0.51 low on Wednesday, erasing its gains from earlier this week. The Securities and Exchange Commission (SEC) filing is now public, in its redacted version.
Softer growth, cooler inflation and rate cuts remain on the horizon
Economic growth in the US appears to be in solid shape. Although real GDP growth came in well below consensus expectations, the headline miss was mostly the result of larger-than-anticipated drags from trade and inventories.