Market Report Its all about the Fed

Yesterday’s movement on the currency market was mainly about the Euro with some positive European industrial production numbers helping the single currency to push back both the Pound and the US Dollar. This was in no small part aided by the uncertainty over what we can expect from the Federal Reserve’s policy statement on Thursday, with an awful lot of interest rate rise uncertainty dogging the Dollar at the moment. This is allowing the Euro to make gains as a result of the USD v EUR seesaw.

Today’s focus on this side of the pond is firmly on CPI inflation due out this morning, with UK interest rate hike expectations also under the microscope. Inflation is expected to have slowed, mainly due to another recent drop in fuel prices, but the Bank of England have made it clear that this is expected and is not a problem and critically is not seen as a reason to expect future interest rate hikes to be put back. This seems to be an almost win/win situation for the Pound – if inflation is down then that is fine, if inflation is up then interest rate hikes could come sooner… So watch this space this morning as this could provide a good buying opportunity if you have Sterling in hand.

In Europe we have the German ZEW economic sentiment survey due out this morning, with a significant drop in sentiment expected to be the result. In recent times we have seen various positive German data releases come out, but apparently to no avail, with the Euro taking no strength and in some cases actually weakening as a result. Sentiment is obviously in the doldrums as a result and this could hurt the Euro as a result, especially if the figure is worse than expected.

Later this afternoon we have the last big release of the day with US retail sales figures due out. A strong figure is expected and as a result, with the Dollar on the back foot because of the uncertainty over the Fed’s decision on Thursday, this could be an opportunity for the Dollar to claw back some of its recent losses. Whether any gains last is hard to tell – until we know the result of the will they/won’t they interest rate hike decision on Thursday, the Dollar is likely to remain under pressure, but if you have a Dollar requirement buying before this release could be a good idea – you would hope that the Fed is making its decisions without relying on a last minute data release, but if a strong figure comes out this can only give more incentive to raise rates sooner, and if a raise does come this Thursday the Dollar will almost certainly come charging back as the most dominant of the major currencies.

As ever stay in close contact with your CI account manager to be kept fully abreast of what is happening and how it is likely to affect your upcoming currency purchase. Yesterday’s movement on the currency market was mainly about the Euro with some positive European industrial production numbers helping the single currency to push back both the Pound and the US Dollar. This was in no small part aided by the uncertainty over what we can expect from the Federal Reserve’s policy statement on Thursday, with an awful lot of interest rate rise uncertainty dogging the Dollar at the moment. This is allowing the Euro to make gains as a result of the USD v EUR seesaw.

Today’s focus on this side of the pond is firmly on CPI inflation due out this morning, with UK interest rate hike expectations also under the microscope. Inflation is expected to have slowed, mainly due to another recent drop in fuel prices, but the Bank of England have made it clear that this is expected and is not a problem and critically is not seen as a reason to expect future interest rate hikes to be put back. This seems to be an almost win/win situation for the Pound – if inflation is down then that is fine, if inflation is up then interest rate hikes could come sooner… So watch this space this morning as this could provide a good buying opportunity if you have Sterling in hand.

In Europe we have the German ZEW economic sentiment survey due out this morning, with a significant drop in sentiment expected to be the result. In recent times we have seen various positive German data releases come out, but apparently to no avail, with the Euro taking no strength and in some cases actually weakening as a result. Sentiment is obviously in the doldrums as a result and this could hurt the Euro as a result, especially if the figure is worse than expected.

Later this afternoon we have the last big release of the day with US retail sales figures due out. A strong figure is expected and as a result, with the Dollar on the back foot because of the uncertainty over the Fed’s decision on Thursday, this could be an opportunity for the Dollar to claw back some of its recent losses. Whether any gains last is hard to tell – until we know the result of the will they/won’t they interest rate hike decision on Thursday, the Dollar is likely to remain under pressure, but if you have a Dollar requirement buying before this release could be a good idea – you would hope that the Fed is making its decisions without relying on a last minute data release, but if a strong figure comes out this can only give more incentive to raise rates sooner, and if a raise does come this Thursday the Dollar will almost certainly come charging back as the most dominant of the major currencies.

As ever stay in close contact with your CI account manager to be kept fully abreast of what is happening and how it is likely to affect your upcoming currency purchase.