15 Dec 2015

Dollar bids gather momentum as investors look to crucial Fed announcement

United States Dollar: GBP/USD was steady throughout most of the morning session yesterday. UK inflation data printed as expected yesterday at 0.1% y/y for November. It was supportive of the pair to the point that CPI edged back above zero for the first time in four months. With this, GBP/USD reached a high of 1.5182. Soon after the dollar started to strengthen and the bids gathered momentum. US inflation data was released in the afternoon but failed to surprise. Instead it seems investors were busily betting on a rate hike at tonight’s FOMC announcement. It’s pretty much fully priced in but given that it’s such a big event and the first time that the Fed would have hiked interest rates in close to ten years, markets are still a little cautious. For that reason it’s likely to be a volatile late New York session with the Fed due to make their announcement on monetary policy at 7pm GMT. GBP/USD fell towards, but not under 1.50 and it opens this morning at 1.5025.

We expect a range today in the GBP/USD rate of 1.4900 to 1.5350

Euro: EUR/USD steadily declined on Tuesday despite the release of better than expected German ZEW data yesterday. With the Fed announcement due later this evening and with expectations for a rate hike, investors and traders decided that the 1.10 figure wasn’t sustainable. It drifted back below the big figure and ended up trading to a low of 1.0905. It hasn’t managed much of a recovery either and opens this morning at 1.0930. A series of manufacturing and services PMIs are due from Europe today but the effects are likely to be limited with such a big market event on the horizon. Meanwhile GBP/EUR has meandered around 1.3750 and opens this morning at 1.3735.

We expect a range today in the GBP/EUR rate of 1.3660 to 1.3800

Aussie and Kiwi Dollars: AUD/USD and NZD/USD have been subdued overnight as markets look towards the Fed announcement. Both are on the back foot slightly this morning and trade at .7190 and .6750 respectively. GBP/AUD and GBP/NZD are both a bit lower too and open in London at 2.0885 and 2.2235.

We expect a range today in the GBP/AUD rate of 2.0740 to 2.1000

We expect a range today in the GBP/NZD rate of 2.2060 to 2.2500

Data Releases

AUD: RBA Bulletin

EUR: Flash Manufacturing PMI, Flash Services PMI

GBP: Average Earnings Index 3m/y, Average Earnings Index 3m/y, Unemployment Rate

NZD: GDP q/q

USD: Building Permits, Housing Starts, Capacity Utilization Rate, Industrial Production m/m, Flash Manufacturing PMI, FOMC Economic Projections, FOMC Statement, Federal Funds Rate, FOMC Press Conference

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