FOMC minutes divided but dollar remains strong

During Wednesday’s trading the pound continued to make small gains against most currencies following the good Services PMI figures on Tuesday. The Euro was also on the back foot as the US markets opened which allowed for GBP/EUR and GBP/USD to peak near the best buying rates for 3 weeks. These gains are expected to be short lived for sterling with a softening of exchange rates expected in the lead up to the election and the real threat of a hung parliament would likely see new 2015 lows for sterling against most major currencies. With the current forecasts in mind, we are currently in what may be a short window for buyers to fix their exchange rate which can be done for up to 1 year in advance for those whose needs are not until the summer.

The only announcement of interest yesterday was the latest FOMC minutes from the Federal Reserve which were not released until 7pm. In this month’s interest meeting the FED indicated that they were taking a more patient approach to interest rate hikes and are currently awaiting further assurance of inflation levels returning to 2% before taking action. Last night’s minutes were very much divided with several members lookin at a June rate hike, but others favouring a policy change later in 2015 and some even feelin that inflation pressures and a strong dollar would restrict any hike until 2016. Despite the varied views the dollar remained in a strong position making gains across the board after the announcement.

Today is Interest Rates decision day for the Bank of England which as with previous months is expected to be a non event with all policies held with no changes expected at midday. With no other key data releases today the markets are likely to be driven by the dollar sentiment from last night’s minutes with GBP/USD already down 1 cent at market open.