FED Release Minutes A Day Early

11 April, 2013

Simon Eastman

Despite a complete lack of data out from the UK yesterday, the pound did surprisingly well having struggled so far this week. With a varied raft of data from France, Portugal, Spain, Germany and Italy coming in lower or as expected it was a chance for the pound to make back some of the losses we’ve seen this week, but unfortunately this didn’t happen immediately. The pound traded fairly flat all morning against the major currencies pairs, the euro and US dollar but managing gains against the commodity lead dollars like the Aussie, New Zealand and Canadian dollars, which seemed to point towards risk aversion from investors.

We saw a more positive movement following the surprise early release of the US Federal Reserve minutes from its last meeting. Expected at 2pm US time (7pm BST), they came out just at 9am (or just after lunch here). The FED are investigating as to whether anything untoward occurred in trading on Tuesday, as it became clear the minutes were sent out a day early (on Tuesday) and as they were in the public domain, they were released first thing today to the wider public.

As markets digested the comments over the afternoon, the view from the FED seemed to be they were considering winding down their QE program, keeping as is, at $85 Billion with the view to stopping by mid to end 2013. This was based on continued positivity and the expected improvement of the labour market (although bearing in mind the meeting was before the recent poor non-farm payrolls figure). Barack Obama also delivered his budget speech, which targeted to dramatically cut the US deficit budget over the next 3 years, by forcing higher taxes on the rich and implementing refreshed spending cuts to replace the ones put in place earlier in the year which combated the feared “fiscal cliff”.

The euro was dragged down, on the opposite side to the currency sea-saw, giving those trading sterling/euro a half cent spike to take advantage of. Those buying any Scandinavian currencies, Swiss Franc or Turkish Lira also managed to take advantage of the spike as they’re all currencies which are vaguely led by the single currency. The Euro weakness was added to by the European commission who announced France, Italy, Spain and Slovenia were all facing deepening economic issues which needed to be addressed urgently to ensure against further destabilisation of the Eurozone.

Today is another quiet day for UK data but we have already had German inflation figures out which came out as forecast at 1.4% on the year. We await the imminent release of the ECB’s monthly report and the Greek unemployment figures due this morning. This is followed by a couple of FED member speeches from across the pond before some import/export and jobless claimant figures and Canadian housing data.

With all this by lunchtime, it’s likely to be a busy morning so whatever your currency requirement is, make sure to contact one of the team today to discuss your options.