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13 Dec 2015

Busy week ahead as Fed expected to hike interest rates for first time since 2006

United States Dollar: The pound had a good day on Friday. It took advantage of a weak US dollar during the early New York session and continued to push higher in to the end of the day. Better than expected Core Retail Sales from the US – printing at 0.4% vs. expectations for 0.3% - failed to stop the rot for the greenback and GBP/USD ended up trading to a high of 1.5240. It’s a big week for GBP/USD this week. The calendar is packed full with data and events including inflation data from both sides of the Pond on Tuesday. UK earnings and employment data are then due on Wednesday and the big event – the US FOMC Statement – is due that evening, with the Fed expected to raise the Federal Funds Rate to 0.5%, the first hike since the global financial crisis. UK Retail Sales and the US Philly Fed Manufacturing Index is then due on Friday.

We expect a range today in the GBP/USD rate of 1.5050 to 1.5210

Euro: EUR/USD was dragged steadily higher on Friday afternoon. It spiked briefly above 1.10 before settling back below the big figure to finish the week. Some better than expected European data by way of Italian Industrial Production and Quarterly Unemployment, although lower tier, was supportive of the move higher in EUR/USD during the morning. GBP/EUR was fairly steady throughout and trades at 1.3835 this morning. ECB President Draghi is speaking today and his comments might likely have an impact. With WTI Crude under $35.5 this morning and commodities continuing to suffer he’s unlikely to sound anything but dovish on inflation, so it will be a matter of how dovish he is that will decide the euro’s fate over the next 24 hours or so, that’s if he decides to focus his comments towards monetary policy. German ZEW (economic sentiment) is due out tomorrow, followed by French and German Manufacturing PMI tomorrow. It’s a busy week for the euro too.

We expect a range today in the GBP/EUR rate of 1.3790 to 1.3860

Aussie and Kiwi Dollars: AUD/USD continued its downward trend on Friday and overnight, pressured lower by the constant and intense sell-off in commodities over the last week or so. The effect of the strong Australian jobs report last week has worn off. NZD/USD has declined steadily too, this despite the release of a better than expected New Zealand Services PMI last night. The pair fell to a low of .6685 early this morning but has recovered a little to open in London at .6725. NZ GDP is due for release on Wednesday, another focus for traders as well as the Fed announcement on Wednesday. Australian RBA Meeting Minutes are due tonight and will be watched carefully too.

We expect a range today in the GBP/AUD rate of 2.0920 to 2.1200

We expect a range today in the GBP/NZD rate of 2.2460 to 2.2700

Data Releases

AUD: Monetary Policy Meeting Minutes, HPI q/q, New Motor Vehicle Sales m/m

EUR: Industrial Production m/m, ECB President Draghi Speaks

GBP: MPC Member Shafik Speaks

NZD: No data

USD: No data

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