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USD strength is the focus

USD strength is the focus

The minutes of the US Federal Reserve’s December meeting surprised markets as it revealed growing concerns regarding the long-term impact of the bank’s asset purchase programme. The minutes highlighted differing views among members with some stating asset buying would be warranted until the end of this year, some want the programme finished well before then, whereas as others highlighted the need for further large scale stimulus, but did not specify the amount or timescale.

The BoE’s Credit Conditions Survey for Q4 2012 reported a sharp increase in the availability of credit to households and firms. The report revealed increased demand for credit from households, although firms remain more cautious. This is welcome news for the MPC and HSBC maintains the view there will be no further monetary easing in H1 as the MPC assess the impact of existing policy measures.

Despite the eurozone’s debt crisis curbing company investment and economic growth, Germany’s unemployment increased less than forecast in December. The number of people out of work rose a seasonally adjusted 3,000 to 2.94 million, with the jobless rate steady at 6.9%. Despite the slowdown in the economy the numbers of lay-offs remain low.

After hitting $1.6380 on Wednesday, GBP/USD has surrendered recent gains and is trading at the $1.6050 level this morning.

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