Markets closely watch US Fed’s decision
Today market eyes are on the US Fed’s next move where it looks set to launch a third round of unconventional monetary stimulus while signalling that a weak U.S. economy may warrant ultra-low interest rates for at least another three years. Fed Chairman Ben Bernanke has made it clear that the central bank will not sit idle while unemployment, currently at 8.1 percent, remains so far above a healthy economic recovery level.
Euro seemed to have surged to a fresh high against the dollar after the German court approved ESM with conditions. The court also ruled that Germany’s €190bn contribution to the €700bn rescue package cannot be increased without legislative approval, a level of conditionality deemed acceptable to the market.
In the UK, the labour market data continues to present mixed signals. Employment grew by 236,000 in the three months to July, although the rate of unemployment nudged up to 8.1%. There was also a surprise fall of 15,000 in the August claimant count measure of unemployment. However resilient the headline numbers appear, there are ongoing concerns that much of the improvement is in part-time, temporary or self-employed jobs.
On the FX markets, euro support following the favourable court ruling has driven EUR/USD above the 1.29 level while GBP/EUR has dipped below 1.25.
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