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Countdown to Fed’s Interest Rate Decision

Countdown to Fed’s Interest Rate Decision

The Pound moved away from multi week highs versus the greenback yesterday, with market participants reluctant to place key wagers ahead of a week packed with data releases from the UK, EU and the US. The market seems to be fervently waiting for the U.S. Federal Reserve this Thursday. Data out today from the UK consists of Producer and Consumer price indexes and in the Euro zone data releases this morning with the ZEW and trade balance, whilst from the other side of the pond later today releases in the form of retails sales and industrial production. Normally data releases such as these would set the course for the major currency pairs but it seems that the market is focusing mainly on Thursday as the Fed take centre stage. China’s slowdown would be a key concern for the Fed with a 14% drop in imports in the past 12 months which makes that the 10th monthly drop in a row this, along with factory gate prices decreasing by almost 6%, does not bode well for a rate increase.

The general state of the Eurozone economy appears to be finding its way back into mainstream media again. Despite some strong economic figures from last week by way of GDP and yesterday’s firmer industrial production numbers, the bloc currency has been gradually losing pace versus its most traded counterparts, although for now, appears to be holding within the trading range.

The decline in the Euro yesterday could also have highlighted a turning point in current market sentiment. The bloc currency has been particularly sensitive to negative market patterns from China and became the main beneficiary, benefitting from the uplift we have recently witnessed. Yesterday, as China’s equity market closed 2.7% down, it was expected that the Euro would continue its trend as a “safe haven asset”; however, as aforementioned, the shared currency continued the downward move.

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