Tag Archives: US

US Election Day

The USD remains supported as the US go to the polls today to elect the 45th President as Hillary Clinton holds a narrow lead in the opinion polls. It is the general consensus that a Clinton win would provide continuity in fiscal and monetary policies and therefore it is highly likely that the Federal Reserve would hike interest rates at their next meeting in December following a Clinton win. On the other hand it is suggested a Trump win would result in uncertainty which could result in a weaker USD.

The USD currently trades at:

GBP/USD 1.2415, EUR/USD 1.1046, USD/CHF 0.9746, USD/JPY 104.43.

Bank of Japan and Federal Reserve

The Japanese Yen dropped overnight as the Bank of Japan kept its main policy rate at -0.1% but revamped its stimulus program and left its options open for further monetary easing in the future before returning to earlier levels. USD/JPY currently trades at 101.58, CHF/JPY at 103.99, EUR/JPY at 113.22 and GBP/JPY at 132.00.

In the USA the Federal Reserve meets this evening (19:00 UK) and is likely to keep rates on hold at their current 0.25-0.50% range. However, market participants will be looking for any comments which confirm the likelihood of a rate hike(s) before year end.

EUR/USD currently trades at 1.1147, GBP/USD at 1.30 and USD/CHF at 0.9770.

Elsewhere, EUR/GBP trades at 0.8575 (GBP/EUR 1.1662).

Central Banks

The US Dollar (USD) weakened overnight as the Federal Open Market Committee (FOMC) left its key interest rate unchanged at 0.50% and pared the outlook for more rate hikes this year. The market expectation is now that there will likely only be two 0.25% rate hikes this year, down from December’s prediction of four.

Whilst the Federal Reserve acknowledged that the US economy was expanding at a moderate pace, economic projections were downgraded with Real GDP forecast at 2.2% this year down from earlier predictions of 2.4%. The Federal Reserve acknowledged the growing risks of a weakening global economic outlook.

Today the market will focus on interest rate decisions from the Swiss National Bank (SNB) at 08:30, Norges Bank (Central Bank of Norway) at 09:00 and the Bank of England (BoE) at 12:00.

Opinions on what the SNB will do today are divided. There are some expectations that in response to the European Central Bank’s (ECB) easing the SNB might cut the range of its 3 month LIBOR rate to -0.50% and -1.50% from the current -0.25% and -1.25% range. However, as EUR/CHF is held well inside recent range and the ECB have ruled out more rate cuts, the pressure on the SNB to deliver lower rates today is limited so the SNB might opt to hold rates at current levels. Nonetheless, the SNB could have a dovish tone in the accompanying statement. EUR/CHF currently trades @ 1.0990, USD/CHF @ 0.9745 and GBP/CHF @ 1.3920.

The Norges Bank today is forecast to cut its key rate by 0.25% to 0.50% and the rate outlook is also likely to be revised down. EUR/NOK currently trades @ 9.46, USD/NOK @ 8.39 and GBP/NOK @ 11.99.

The Bank of England is expected to hold rates at 0.50% and its asset purchase facility at £375bn. It is unlikely the Bank of England will tighten its monetary policy in advance of the UK referendum on whether Britain should remain in the European Union due June 23rd. The prospect of a possible BREXIT means that the Pound is likely to remain under pressure and prevent any significant gains in the Pound. GBP/USD currently trades @ 1.4273, GBP/EUR @ 1.2660 (0.79p) and GBP/JPY @ 159.32.

POUND FALLS, US DOLLAR SOARS.

Yesterday 05/11 the Pound tumbled in value following the Bank of England’s latest report which downgraded both the UK growth and inflation forecast and subsequently pushed out market expectations of a Bank of England interest rate rise. The Pound fell over 1% against all major currencies with GBP/EUR falling from 1.4199 to 1.3966 and GBP/USD falling from 1.5401 to 1.5203.

This afternoon 06/11 the US Dollar has appreciated strongly, more than 1%, following overwhelmingly strong US employment data. The US Dollar appreciated strongly against the Euro forcing EUR/USD down from an earlier high of 1.0892 to a low of 1.0707. The US Dollar also appreciated against the Pound with GBP/USD falling from 1.5219 to 1.5030. The US Dollar also appreciated against the Swiss Franc with USD/CHF appreciating from 0.9946, through parity to 1.0065. With the US Dollar appreciating more against the Euro than the Pound, GBP/EUR recovered from 1.3896 to 1.4065.

There is lots of global economic data due for release next week and we also have speeches from Bank of England Governor Mark Carney and ECB President Mario Draghi on Wednesday 11/11 which both have the potential to move the market.

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WEAK US RETAIL SALES DATA FORCES USD LOWER

The US Dollar (USD) has lost some of its recent gains following this afternoon’s release of much weaker than anticipated US retail sales data. EUR/USD recovered from 1.1728 to 1.1845, whilst GBP/USD rose from 1.5145 to 1.5267. USD/CHF fell from 1.0238 to 1.0139 and USD/JPY fell from 117.96 to 116.08.
Market focus now turns to European and US Inflation data released on Friday 16/01/15.

USD Strength

The US Dollar remains supported as US employment data beat expectations with the US employment rate falling from 5.8% to 5.6% the lowest level since June 2008. The Federal Reserve has held interest rates near zero since 2008 but expectations are increasing that the Federal Reserve will start to increase interest rates this year, possibly in the second quarter.
This coupled with the expectation that the European Central Bank will ease monetary policy has forced EUR/USD to its lowest levels since December 2005, hitting a low of 1763.
In the UK the Pound was supported earlier this morning by better than expected manufacturing and trade balance data pushing GBP/EUR to a high of 1.2844 and GBP/USD up to 1.5174 before receding to 1.2820 and 1.5096.

USD & CHF REACT TO FED & SNB

The US Dollar (USD) gained overnight as the Federal Reserve kept rates near zero and sounded more optimistic on the economy whilst maintaining their pledge to be patient on increasing interest rates. The Dollar appreciated against the Euro and the Pound forcing EUR/USD to a low of 1.2266 and GBP/USD to 1.5551.

In Europe, the Swiss Franc (CHF) has depreciated sharply today as the Swiss National Bank (SNB) introduced negative rates to try and stem the rise of the Franc pushing EUR/CHF from 1.2009 to a high of 1.2097 before settling around 1.2045. The US Dollar also gained against the Franc with USD/CHF appreciating from 0.9722 to 0.9846.

USD Strength as Fed ends Quantitative Easing programme

The USD has appreciated following the Federal Reserve’s announcement that its programme of Quantitative Easing (QE) will end. Despite the global economic slowdown, the Federal Open Market Committee (FOMC) were generally more upbeat about the underlying strength of the US economy than in previous months but did state that interest rates would remain on hold at their current lows for a considerable time.

The Dollar has appreciated against the Pound, forcing GBP/USD back below 1.60, hitting a low of 1.5962 so far. Against the Euro and Swiss Franc the US Dollar has also advanced forcing EUR/USD down to 1.2556 and USD/CHF up to 0.9606.

A copy of the FOMC Statement can be found below:

http://federalreserve.gov/newsevents/press/monetary/20141029a.htm

October 29 2014

 

Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective. Market-based measures of inflation compensation have declined somewhat; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Richard W. Fisher; Loretta J. Mester; Charles I. Plosser; Jerome H. Powell; and Daniel K. Tarullo. Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.

 

 

US Dollar Strengthens on FOMC Minutes

The USD has appreciated overnight after minutes released by the Federal Open Market Committee (FOMC) showed that the US central bank was gradually taking a more hawkish stance as economic conditions (labour market and inflation) begin to normalise to levels last seen before the financial crisis.

The growing prospect of interest rate rises in the US coming sooner than expected have caused the USD to appreciate, forcing GBP/USD back below 1.66, hitting a low of 1.6565 so far and forcing the EUR down against the USD to 1.3242. Against the Yen the USD also appreciated sharply with USD/JPY hitting a high of 103.96.

US Debt Deal: Signed, Sealed, Delivered

Congress finally managed to reach an agreement yesterday evening regarding an increase to the federal debt limit and a short term budget which will reopen the government and send furloughed workers back to work. Despite Congress having left passing a bill to the very last minute, as has become a common occurrence in recent years, judging by market reaction, investors did not seem too phased despite a plunge back into global economic crisis being potentially imminent.

Following the aversion of what could have been the beginning of a truly global crisis – the first US default in over 200 years – very little changed in the markets. Equity markets remained rather quiet as did the FX market, especially when taking into consideration the enormity of the catastrophe that could have materialised had an agreement not been reached. The dollar rose slightly in the build-up to Congress reaching a deal with GBP/USD falling to a daily low of 1.5893 just after 17:00 yesterday, however the greenback has pared its gains this morning with cable rising to a daily high of 1.6092 and similarly EUR/USD reaching 1.3637 so far this morning after having fallen as low as 1.3472 yesterday.