Markets focus on US Dollar sentiment

Thursday’s trading was absent of any notable eco-stats and so instead traders were reacting to the previous nights announcement from the Federal Reserve with their decision to hold interest rates for another month, although maintaining plans to hike in December’s meeting assuming that data continues to support this decision. Following the hold on rates the greenback weakened further yesterday with both the Pound and Euro gaining around half a cent. Any positive moves against the US Dollar are likely to be short lived as both the Bank of England and ECB are expected to ease monetary policy further before the Fed meet again in December, where there is now a 61% chance of a rate hike. By the end of the year both GBP/USD and EUR/USD could be trading significantly lower than current levels.

The Dollar softened further in the afternoon session as Existing Home Sales missed expectations showing a drop of 0.9% in August rather than the forecast 1.1% increase. Dollar buyers may wish to consider taking advantage of any short term spikes for any requirements over the next year. You can do this with just a 10% deposit using our popular Forward Contracts.

The knock on affect of a weaker Dollar is typically a stronger Euro, something that has been evident in the last 24hrs. GBP/EUR therefore could find itself struggling to improve and at risk of further losses in the coming weeks. Sterling made small recoveries against nearly all currencies yesterday except for against the Euro.

We round up the week with some Euro-zone PMI stats at 9am including manufacturing and services, with very little change expected from last months small growth figures. Manufacturing PMI for the US is due this afternoon at 2:45pm and is one of the key areas the Fed will be assessing to make their decision on a possible December hike so expect volatility. At 1:30pm the Loonie takes centre stage with Canadian inflation figures and Retail Sales both announced at the same time.