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Central Banks take centre stage again

Central Banks take centre stage again

Financial markets are steeped in soporific stasis and seem unwilling to wake up until Wednesday when the Bank of Japan and the Federal Reserve release their latest monetary policy decisions.

With no UK economic data releases yesterday the Pound rose with an improvement in oil prices and an improvement in risk appetite. Sterling briefly moved to highs close to 1.3090 against the Dollar and 1.1710 against the Euro. Concerns surrounding a “hard brexit” causing longer-term damage to the UK economy resurfaced. Sterling ebbed during the afternoon and ended the day versus the Dollar around the 1.3040 levels and against the Euro 1.1675.

The Euro also had no tier one economic data to drive trading patterns. As a consequence the market saw little volatility in yesterday’s European trading session.

There are reports that the ECB will produce no further rate cuts until the end of the year and speculation that the bond buying programme will end by next March have also been dismissed. German producer prices fell back into deflationary territory in August after rising for the past 4 months. The -0.1% drop in PPI was led by energy prices which fell 5.5% on the year. Excluding energy, PPI fell 0.3% from Aug 2015 and remained unchanged from July.

The US dollar opened on Monday on a soft note but managed to regain control by the end of day. As the BoJ and FOMC decisions loom, the dollar will be looking at another quiet trading day. In the US, building permits and housing starts figures will be on the tap today, but traders will most likely focus on positioning ahead of tomorrow’s all important central bank decisions.

Data To Watch: 7am EUR German Producer Price Index (Aug) .1.30pm USD Building Permits & Housing starts.

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