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For the second day running, currency markets have traded within narrow ranges. We’ve also continued to see Sterling gain some positive momentum against the euro, US dollar and most other currency pairings. Meanwhile, EUR/USD has struggled, and seems to be unsure of its true trend for the week, as it continues to yo-yo.
Today, the conclusion to the Federal Reserve’s meeting will very much be the main focus of attention. The US interest rate decision is due to be announced later on at 7PM, GMT. The Fed is expected to hike interest rates by 25 base points (to a figure of 0.625%) and most have had this increase factored in for the past couple of weeks.
US dollar sensitivity is also likely to be seen throughout the updated interest rate projections, and Fed Chair Yellen’s press conference. In its last set of projections back in September, the Fed was indicating two 25 base point hikes next year and three in 2018, bringing rates to 1.875% by end-2018. Markets can be expected to brace for this, and any further speculation surrounding the rate changes.
For those in the US dollar market, the likely rate hike is suggested to help the dollar build strength and potentially take the front foot over Sterling once again. On the other hand however, should the Fed disappoint, the dollar may suffer.
Data to come
Looking at the rest of the market’s macroeconomics today, we have the UK Unemployment Rate and Average Earnings figures (both for October) due to be released at 9:30AM, followed by The Bank of England’s Governor, Mark Carney, due to speak at the launch of the Task Force on Climate-related Financial Disclosures today at 12:15. A hawkish (advocating an aggressive policy) tone will be positive for the pound. Furthermore, we also have some US data in the run up to this evening’s rate decision with Crude Oil Inventories at 3PM.
