USD weaker as Fed sounds more cautious

Today's Highlights

Sterling bounces after BOE minutes

USD weaker as Fed sounds more cautious

Eurozone data continues to disappoint

FX Market Overview

Sterling had a slightly better day yesterday after a few days of decline. The Monetary Policy Committee minutes showed the same 7-2 vote as previously but there was more talk of caution; a mood reflected in the Federal Reserve's meeting - see below . Nonetheless, the Pound made minor gain against most currencies but UK retail sales could undermine those gains this morning. The consensus forecast is for a reasonably health gain to an annualised 3.8% but if the real figure undershoots that, sterling will be on the back foot again in a flash.

The members of the US Federal Reserve's Open Market Committee exuded an air of caution at their last meeting. The minutes showed a concern that the Fed should be ready to act if long term inflation expectations started to slow. The Fed is still maintaining its stance of low interest rates for a ‘considerable time’ but even that phraseology was questioned. The slightly more dovish tone allowed the US Dollar to give up some of its gains. This afternoon is chock-a-block with us data releases and some are very significant. Inflation, business and consumer confidence indices and housing data will assault our senses from 13.30 onward. The US Dollar will have a volatile day no matter what the final outcome. This is a good day to let automated orders do the work for you.

The euro is caught like a discarded newspaper on a motorway, Flung from lane to lane by each passing news report. Sadly, from the euro side of things, the news is largely bad and this morning's rash of Purchasing Managers Indices has been uniformly worse than expected. Hence the euro has weakened within a small range. We have a couple of ECB board members speaking this afternoon so that may be influential.

That is about all we have to focus on today. On a macro scale, the foreign exchange markets are being influenced by lower commodity prices, nervousness over the Middle East and slowing growth in many countries. However, central bankers are wielding a heavy influence; partly due to their inaction and prevarication and partly due to the cliff hangers over when and how interest rates will start rising. I suspect we are nearly a year away from any central bank being so bothered about inflation that they start to restrict money supply and we may even see a further loosening of monetary policy from the likes of the ECB and Bank of Japan before then.

The end of 2014 and the first half of 2015 are set to be highly unpredictable. Is it ironic that I can predict unpredictability?

Back in the real world, a student in Singapore has received finding to create a smart phone App that incentivises people to put their phones down and speak to each other face to face. The App works when you meet someone, and you both place your phones together. The app disables the phones' external communications and starts growing a tree on screen which yields presents and discounts the longer you leave the phones inactive. Isn't it sad that we need to encourage people to speak to each other?