No Horse Race
There was a minor shock from the US yesterday after orders for US durable goods unexpectedly declined. This was the initial report from the two day Fed meeting which concludes today and is expected to announce the end of its bond-purchase program.The probability of a surprise extension seems overwhelmingly unlikely, and so the main impact on the currency markets will be the wording of the accompanying policy statement. As there is no press conference, the words of this statement will be probed to see if there is any hint as to when the first subsequent rate hike will be. This seems to have been put on the back burner of late as it is thought the Fed will want to stabilize the economy further against the backdrop of the weakening global economy before returning to “business as usual”.
The question then arises over whether the UK will re-enter the rate hike race, a move which should strengthen Sterling. It seems, however, that the Bank of England are not ready to do that just yet due to the softening of pay and inflation data against the backdrop of the unstable global economy.
The Australian Dollar is on the march at the moment as the interest rate of 2.5% continues to attract investors. This is in direct contrast to the Eurozone which has seen a record exodus from financial assets as foreign and domestic investor demand have been equally negative due to Mario Draghi’s push in lowering the interest rates and weakening the Euro.
We have consumer credit and mortgage approvals out of the UK today, mortgage applications out of the US, the Bank of New Zealand rate decision but all is focussed on the rate decision from the Fed, the end of QE and the monetary policy statement.