How will Fed meeting impact USD?
Today is a heavy day for economic data, perhaps progressing with significance as the day goes on. The highlights will be:
Already released – German Unemployment figures. Showing a fractional improvement at 6.7% unemployment, the data will at least offer Euro some support.
10am BST – Eurozone Consumer Price Index. Effectively a measure of inflation for the Eurozone, the markets are expecting a figure of 0.7/0.8%. A lower figure provides more scope and perhaps more reason for the ECB to consider rate decreases/further stimulus at its next meeting. As such, a lower figure would weaken Euro and we could see GBP/EUR break 1.2200.
13:30 BST – US GDP figures. Expected at circa 1.6% for the quarter, this figure will demonstrate how the US is growing and (given the significance of the US in terms of global demand) this is likely to impact the ‘risk on/off’ scenario. As such we may see a USD sell off if it is more positive or USD buying/strengthening if it is worse than expected (which is slightly counterintuitive).
19:00 BST – US Fed’s monthly policy statement in which they will divulge their decision, after a two day meeting, on the US headline interest rate and, more importantly, the pace of reduction in the Treasury purchase program. In other words, we will get confirmation that the Fed are reducing the purchases of bonds (designed to stimulate the economy) by a figure, expected to be USD 10bn.
Given the timing of the Fed release, we will (as ever) see a double impact of this. One fairly muted impact around 7pm tonight with just the US trading but a more significant impact as London starts trading tomorrow morning.
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