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In 564 words, the US Federal Reserve yesterday told us that policy may rise next year, but it may not. The pre-meeting speculation centred around their stated intention to keep rates near zero “for a considerable period”. Now, they can be “patient” in normalising policy, but state that this consistent with their previous language. So, they changed the words, but not their meaning”¦ supposedly. That said, Fed Chair Yellen appeared a little more hawkish in the press conference, implying that this could means that rates will remain at current levels at least for the first quarter of next year. In summary, the dollar did not know what to make of the statement, ending up pretty much unchanged in the aftermath. The press conference however put the dollar firmer against all major currencies as the near term outlook for rates was revised higher.

The forecasts published alongside the statement did show a slowdown in the pace of anticipated rate increases. The other piece of overnight news has been the move to negative rates by the SNB. This will apply to sight deposits, with a -0.25% mid-point to the SNB’s target range for 3-mth CHF LIBOR. This is not wholly surprising given the prevailing levels of EURCHF, but the CHF response has been modest, weakening some 0.4% initially.

The IFO data today for Germany will be the main focus early on, where a modest improvement is anticipated. Also in focus will be UK retail sales and the usual Thursday claims data in the US. Naturally, an eye will be kept on the situation on the Russian rouble, where some signs of stability were emerging on Wednesday and early this morning. But there remains a considerable degree of uncertainty going forward regarding not only Russia, but many other emerging market currencies and volatility is likely to remain on the high side going into year end.

Further reading:

EURUSD, GBPUSD, USDJPY TA & Pivot Points – Dec. 18 2014

UK retail sales leap 1.6% – GBP/USD follows