All Focus On The Central Banks

29 October, 2015

Simon Eastman

Wednesday was a day of little reason for the direction of trading other than the fact markets were awaiting the data releases from the evening where we had the US FOMC interest rate decision and later on the decision from the RBNZ.
As such, traders had little to go on and were clearly trading from investor sentiment. The pound dipped against most of its major pairings except for the antipodean dollars, which we could put down to the fact the Kiwi was under pressure from the unknown results of the central banks interest rate decision later in the day and the Aussie which had weakened significantly overnight on Tuesday that it spent the European session consolidating within a tight range.

Only German import/export data was of any note in the morning but despite coming in under expectations did little to hurt the euro as it climbed against the pound and the US dollar. The US data for the afternoon was of little interest, although the poor crude oil stocks data did allow the pound to reverse the trend and make some gains against the greenback. The clear winner against sterling on Wednesday was the Loonie which made a 2 cent gain over the day. This was down to oil prices posting their best levels in two months.

The US dollar managed to claim a cent against sterling last night though as the FOMC indicated that December this year might be the moment they raise interest rates. We have been awaiting this for months now but its not happened so markets reacted moderately, although took it as a positive statement that current global concerns like China are not a hinderance on the US and that Decemebr could be the month for the first interest rate hike. The good news for any euro buyers out there though is that true to form of the currency see saw recently the gains the dollar made, mirrored the losses the euro made with GBP/EUR rates jumping up a cent.

Down under the RBNZ released their interest rate decision which was expected to be unchanged. True to expectations they did hold off on any changes but did hint at further cuts in the coming months. This triggered Kiwi selling and the pound spiked nearly 2 cents, although the gains were short lived as the spike almost instantly reversed. The RBNZ governor stated they would be adopting a “wait and see” approach going forward with a chance of another cut, following three consecutive cuts we saw from June this year. Issues with China were cited along with inflationary pressures which remained below there target levels.

So after the events of yesterday, which caused much movement on the rates, what does today hold?

The answer, another day of volatility as we have a multitude of data releases from across the globe, the highlights of which include, German unemployment data, UK consumer credit, mortgage data and money supply in the morning followed by US GDP and German inflation figures at lunchtime, concluding with US homes sale data in the afternoon.

So plenty today, added to the central bank releases last night, for traders to contend with means today is likely to be pretty volatile. If you have a currency transfer to make in the coming days it might be prudent to speak to one of the Currency Index team this morning to arrange it, just in case markets move against you.