US Dollar:
The main news of yesterday was the minutes of the FED meeting, as such these get poured over in minute de¬tail where every comma and fullstop are analysed. The vote was 9-1 to leave the discount rate unchanged, how¬ever they have confirmed the recovery is more modest in near term and the pace of recovery in output and em-ployment has slowed in recent months. The FED has spent most of last year winding down the aggressive measures to support the US economy, in an about face they have pledged to keep the amount of assets it holds at $2 Trillion rather than allow the level to taper off over time as they expire. In rolling this support they should help maintain low long term interest rates and although does not represent a fully blown QE2 is effectively one step closer. The immediate impact of the Fed’s policy change was limited, the impression it has left for investors is positive however as it is perceived the FED are aware of current concerns and have shown they are fully able and willing of throwing an awful lot of fire power if necessary. The rights and wrongs of more QE is another very long story!
Data: 15:30 Oil inventories
Pound:
Having got the FED out of the way, the BoE now has its own turn of trying to appease the markets. They will announce the August Inflation report this morning and have a little work to do to convince everyone they still have a handle on where Inflation stands and their ability to control it. They will undoubtedly have to admit Infla¬tion will be higher next year than they forecast three months ago and growth will be lower. The blame will fall on the VAT increase and higher commodity prices that could not be foreseen however they have to now convince everyone they have effectively been unlucky with their forecasts rather than slightly negligent. At least they have an ally in the government as despite the open letter King has to write the response will undoubtedly be “don’t worry!” as the last thing the government and this countries economy needs right now is higher interest rates! Consumer confidence falling in figures this morning provides stark warning of where we currently stand.
Data: 10:30 Inflation Report; Jobless claims and Unemployment rate
Pound:
Having got the FED out of the way, the BoE now has its own turn of trying to appease the markets. They will announce the August Inflation report this morning and have a little work to do to convince everyone they still have a handle on where Inflation stands and their ability to control it. They will undoubtedly have to admit Infla¬tion will be higher next year than they forecast three months ago and growth will be lower. The blame will fall on the VAT increase and higher commodity prices that could not be foreseen however they have to now convince everyone they have effectively been unlucky with their forecasts rather than slightly negligent. At least they have an ally in the government as despite the open letter King has to write the response will undoubtedly be “don’t worry!” as the last thing the government and this countries economy needs right now is higher interest rates! Consumer confidence falling in figures this morning provides stark warning of where we currently stand.
Data: 10:30 Inflation Report; Jobless claims and Unemployment rate
Euro:
The EUR has weakened this morning against both the USD and Sterling and as this CCY is our clients most popular to purchase to fullfill invoices etc at least this will cheer everyone up this morning! On the Daily Chart below (available via Online platform) you can see the trend that seemed to be forming of a strengthening EUR seems to have been broken and the 1.21 level (Inter-market) is once again being tested. If broken we could look to see a rally back to the highs of late June however as with all CCY moves currently this needs to be monitored closely as any random figure or announcement could suddenly see GBP knocked. BoE inflation report will be first obstacle.
General:
China’s economy softens however this is said to be no cause for alarm as this is the government trying to navi-gate economic activity back to normal after record lending had stoked concerns about over heating. In a differ¬ent related story in UK Telegraph a far more worrying story emerges regarding banks “ £213 bn hidden loans” It suggests the Chinese banking system is creaking with huge off balance sheet lending and is a story to follow.
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| GBP/USD | 1.5807 |
| GBP/EUR | 1.2092 |
| EUR/USD | 1.3068 |
| GBP/JPY | 134.52 |
| GBP/AUD | 1.7474 |
| GBP/NZD | 2.1972 |
| GBP/ZAR | 11.464 |
| GBP/CHF | 1.6666 |
| GBP/CAD | 1.6348 |
| GBP/SGD | 2.1470 |
| GBP/THB | 50.51 |
| GBP/HKD | 12.268 red-down; blue-up (snap shot) |
For more information or to get the latest spot rates contact:
John Paul Georgiou
Senior Foreign Exchange Broker
\n john.georgiou@voltrexfx.com