Dollar weakens as FOMC minutes emphasise that nothing much has changed

United States Dollar:

Yesterday evening, FX markets were generally steady in the run-up to the FOMC meeting minutes. Cable struggled to make it through 1.6760 and fell no lower than 1.6725, still riding high following the strong UK manufacturing data released a day earlier. As far as the markets were concerned, the FOMC meeting minutes were the main event of the day. If anything, they were more dovish than expected, failing to make any mention of Yellen’s comments, after the rate meeting last month, that a “considerable” time between ending QE and the first Fed rate hike could be six months. Moreover, the minutes indicated that members were not committed to hiking rates in the first half of 2015. There also seemed to be some disagreement among officials about the amount of labour market slack in the economy. Meanwhile, getting rid of unemployment and inflation thresholds could make it more difficult for markets to interpret the impact of data. The rather dovish stance saw the USD fall across the board, and GBP/USD traded to a high of 1.6819. It has settled back overnight to open this morning at 1.6775. Investors now await the Bank of England’s monetary policy announcement. This, however, is likely to be a non-event as interest rates and QE are expected to remain unchanged, unless Carney decides to make some accompanying comments.

We expect a range today in the GBP/USD rate of 1.6690 to 1.6820.

Euro:

EUR/USD was steady for the most part of yesterday morning, as investors waited patiently for the FOMC minutes. It did make very mild gains in the morning session, though, buoyed by some good news from Greece – they are looking to raise about €2.5bn from a bond sale today. Data from Greece, namely industrial production data, was also positive yesterday, and the EUR/USD rose to a high of 1.3827 in advance of the FOMC minutes. Come the big event, it gapped to a high of 1.3850 and continued to attract bids in Asia, rising to a high of 1.3870. It is a touch firmer against the pound, too, in spite of the release of weaker than expected French and Italian industrial production data this morning, as well as French CPI which printed softer than m/m forecasts. GBP/EUR opens this morning at 1.2105.

We expect a range today in the GBP/EUR rate of 1.2065 to 1.2160.

Aussie and Kiwi Dollars:

AUD/USD has made significant gains over the last 24 hours. Not only did it react positively to the FOMC minutes, but it also benefited from the strong local employment data released overnight. The unemployment rate was shown to have fallen to 5.8% and 18,100 jobs were added to the economy in March. The details weren’t perhaps as positive as the headline suggested though, as it turns out the jobs gains were driven in large part by part-time employment. That said, AUD/USD siphoned through the 94 US cents level and traded to a high of .9460. It opens close to this level at .9450. NZD/USD has gone along for the ride and opens in London at .8720. Business NZ manufacturing PMI for March was revised up to 58.4 vs. a prior reading of 56.5 which also supported the ‘bird’.

We expect a range today in the GBP/AUD rate of 1.7680 to 1.7850

We expect a range today in the GBP/NZD rate of 1.9165 to 1.9340.