Category: Daily Look

Watching Fed Risks



Despite the downward revisions to growth seen for the first quarter, the Fed is unlikely to waver from its course of tapering by USD 10 bln per meeting when the two-day meeting concludes today.

Update: Taper 5: lower 2014 GDP forecast – USD shakes

Follow a live blog of Janet Yellen’s press conference.

Yesterday’s inflation numbers came in on the firmer side, in line with other recent indications on prices giving a similar picture and the labour market continuing to show steady signs of improvement.  We are likely to see Fed Chair Yellen given a more considered view of policy at the press conference today, after the March gathering saw considerably more volatility as she was a little too candid in her choice of words in relation to the timing of rate hikes after bond purchases had ended.  That said, if anything the risk to the dollar is likely to be to the upside should the Fed sound a little more hawkish.
Before then, the minutes to the June MPC Meeting are likely to attract more attention than usual. Last month, they noted that the decision to keep rates on hold had become more balanced for some and since then, we’ve had Carney’s speech last week suggest that rates could rise this year. Some viewed this as laying the ground for the minutes to show at least one person voting for higher rates. If seen, this will likely give some further support to sterling and allow cable to make a more sustained pushed above the 1.70 level.  EURGBP is still the one to watch for a more sustained push below the 0.80 level.

Further reading:

GBPJPY Signaling Bullish Continuation

NZD/USD: Trading the New Zealand GDP

Inflation Figures Steer Currencies Ahead of Policy Announcements:

Inflation Figures Steer Currencies Ahead of Policy Announcements:

Guarded sentiment prevailed throughout the majority of yesterday’s trading session, with key macro-event risks keeping participants from adding too much exposure to high-yielding asset classes.  The S&P flipped-flopped between positive and negative values before finally ending the day slightly higher than Friday’s close, just under the 1,940 mark.  The geopolitical situation in Iraq combined with the FOMC meeting on Wednesday kept protection well-bid, as the

FOMC policy meeting is not expected to make waves

FOMC policy meeting is not expected to make waves

The focus is on monetary policy over the next two days, with the FOMC meeting set to commence today, cumulating in the press conference tomorrow, which should create fewer waves than the last meeting press conference in March. Sterling remains firm into the CPI numbers due at 08:30 GMT, with the headline rate seen falling

Some nerves emerging

Some nerves emerging

The complacency that has crept into most asset markets over recent weeks was showing some signs of abating last week.  The VIX measure of equity volatility moved further away from the multi-year lows that were recorded earlier this month. The situation in Iraq has also had a bearing on markets, lifting both the oil price

Oil Rallies to Yearly Highs on Iraq Concerns

Oil Rallies to Yearly Highs on Iraq Concerns

A sour start to the day that was brought on by the World Bank downgrading global growth was further exacerbated by geopolitical concerns in Iraq after an offshoot al-Qaeda group took control of Mosul, the second largest city in Iraq. A late-day rebound in equities was unable to save stocks from closing convincingly in the

Will the kiwi fly?

Will the kiwi fly?

After the initial resilience seen on the day of the policy moves last week, the euro has been weakening over the subsequent trading sessions, down from 1.3660 at the start of the week to 1.3540 currently and weaker vs. all the other major currencies.  But the bigger issue for the currency is the performance of

Calm before the storm?

Calm before the storm?

Despite the lack of headline volatility in FX (and elsewhere), there are still some underlying trends that were evident in the overnight trading session. The Aussie is the first stand-out, with the latest data on confidence and house lending supporting modest gains on the currency.  AUDUSD is nudging the 0.9400 level, whilst AUDNZD continues to

Weak FX reaction to last week’s headlines

Weak FX reaction to last week’s headlines

Last week was meant to provide some answers for FX markets, which was the case for the ECB and less so for the US labour market data, with Friday’s payrolls numbers coming in broadly in line with expectations. For now, the euro has not significantly reacted to the events of last week and although we

Euro rebounds after Draghi’s policy shift

Euro rebounds after Draghi’s policy shift

The much anticipated ECB meeting saw Draghi deliver pretty much what was expected in terms of rate cuts and easing measures.  Having been as much as one big figure lower, EURUSD more than recovered by the end of the day, with similar reversals seen on the EUR crosses. There were two principle reasons for this.

Have we priced too much?

Have we priced too much?

The irony of today that so much has been written about the impending ECB meeting, despite the fact that ECB officials have pretty much told us what will happen. The details of course are lacking and indeed their impact on the currency, both immediately and beyond today. Rates are set to be cut, the deposit