Economic data taking a long weekend
Bank of England’s (BOE) rate-setting committee suggested policymakers were in no hurry to raise interest rates soon. Nine members of the Monetary Policy Committee voted 8-1 to keep rates on hold at a record-low 0.5 percent. This result was as expected by the market and most saw a relatively soft outlook for inflation from the BOE.
Despite this, Sterling gained some ground over the US Dollar, who’s own Fed’s view also remained dovish. The strength could be due to the relatively upbeat growth prospects mentioned in the minutes, with the economy expected to have expanded 0.6% in Q3. Mark Carney also made a note to mention that the BOE are not dependant on the movement of the Federal Reserve to increase rates, though such movement could impact the strength of Sterling heavily.
The US Dollar started trade overnight in Asian markets under a haze, having come under pressure from the Federal Reserve’s September meeting that reinforced uncertainties that the central bank will hike interest rates this year. The minutes demonstrated a cautious Federal Reserve that had deferred long-awaited tightening because policymakers at the central bank wanted to ensure that a global economic slowdown would not threaten to unsettle a U.S. recovery. The minutes have been seen as reflecting a dovish tone in comparison to the last meeting on September 17.
The Euro was pretty flat a versus Sterling and the US Dollar yesterday, as market participants shied away from the Eurozone. Overall, this week has been a poor one for the Euro as German service sector data weighed heavily on the single currency earlier in the week and Germany’s services purchasing managers’ index (PMI) decreased slightly to 54.1 in September from 54.3 the month before. A fall in imports by -3.1% in August by Germany compared to a month earlier has been viewed as a sign of slowing domestic demand. To make matters worse, Germany’s exports have been viewed as slow, by a relatively larger -5.2%, representative of a slowing global demand for German goods and services. All eyes are now looking to next week’s releases in the form of Eurozone CPI which measures the changes in the prices of goods and services from the consumers’ perspective.
Today, there’s not much in the way of data releases from Europe and the US, only data from individual countries in Europe. In the US, the import prices and the wholesale inventories will be published. These data publications rarely have much impact on currency trading and low import prices could be partially caused by the strong Dollar.
So, global factors will once again set the tone for currency trading. Going into the start of the European session, the situation looks little different from earlier this week. Risk sentiment remains constructive with both equities and commodities showing upside momentum.