Concerns about a damaging 'hard Brexit'

Today's Highlights

• Concerns about a damaging "hard Brexit"

• Dollar remains firm against the Euro

• Fed meeting minutes today's focus

FX Market Overview

The Dollar remained firm against the Euro but pared back some gains against other major currencies as focus turns to Federal Reserve minutes later on today. Following on from the previous meeting on September 21st, three of ten voters dissent the decision to keep Federal Funds rate at 0.25-0.50%. The vote showed that hawks in Federal Open Market Committee (FOMC) could be starting to gain momentum and markets will be looking for further evidence of that.  The release of the minutes should give markets a sense on how firm the Federal Open Market Committee (FOMC) is on raising interest rate in December. Currently, the Federal Reserve (FED) fund futures are pricing in nearly 75% chance of a December move.

In the UK, newly appointed Bank of England (BoE) MPC member Michael Saunders said that there will be "an inflationary effect coming through in the next two-to-three years from the drop in the Pound". Import prices could "rise perhaps 12-13 percent". Concerns about a damaging "hard Brexit" have kept Sterling under pressure however UK Prime Minister Theresa May has accepted that Parliament should be allowed to vote on her plan for taking Britain out of the EU. She made it clear that there should be no attempt to block Brexit but with more parliamentary involvement, we may see a toning down of the more extreme hard Brexit rhetoric. The Pound jumped 1.5% although it is yet to be confirmed if this is simply a relief rally or a change in sentiment.

On the data front, Australia Westpac Consumer Sentiment rose 1.1% in October. Japan Machine Orders dropped -2.2% month-on-month in August. The Eurozone will release Industrial Production while Swiss will release ZEW expectation in European session. The main focus today will be later this afternoon when the Fed release the Federal Open Market Committee (FOMC) minutes at 19:00 GMT.