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01 Feb 2017
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Dollar slips on FOMC – Next up BoE

United States Dollar:

The dollar has slipped overnight as the latest FOMC shed little new light on to the exact timing of the next rate hike from the Federal Reserve. The release continued to state that the: “labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace” however this was countered by comments that “business fixed investment has remained soft” and that “inflation was still below the committees 2 percent longer-run objective.” With little new language used the statement was interpreted as being slightly dovish as there was no clear indication of when the next hike will be. The result was a softer dollar throughout the Asian session and as we open this morning, with USD/JPY back under 113, EUR/USD heading back to 1.08 and GBP/USD currently at 1.2685. Yesterday also saw UK Governments European Union Bill pass a parliamentary vote with ease with 498 MPs backing it against 114 opponents. The result means Theresa May’s Government now has the power to trigger Article 50. Europhile Tory MP, Ken Clarke rebelled as was widely expected, the only conservative MP to do. There was yet more bad news for Jeremy Corbin as 47 Labour MPs voted against the bill which he had instructed all to vote for.

This afternoon sees a white paper being published by the government which will outline a strategy for exiting the EU. This bill will be subject to debate in parliament with numerous caveats and amendments re: access to the single market likely to be demanded by parties from all sides, especially the SNP. Today’s main event is the Bank of England’s “Super Thursday” data-dump with the interest rate vote and monetary policy summary being combined with February’s Inflation Report. The report is likely to see upward revisions to both GDP and inflation forecasts with the economy continuing to grow surprisingly strongly post-Brexit and CPI rising faster than expected due to the depressed level of sterling and recent upward moves in commodity prices. BoE Governor, Mark Carney’s language at the accompanying press conference will be closely monitored for any hints re: changes to interest rates. Other events today include the UK’s Construction PMI and Unemployment Claims from the States.

We expect a range today in the GBP/USD1.26 – 1.2775

Euro:

There has been little news from the Eurozone with the shared currency benefitting from a softer dollar post-Fed. EUR/USD has regained the 1.08 handle with upward pressure being applied from this week’s better than expected GDP and CPI readings from Europe. We still await details of Donald Trumps promised infrastructure spend and until we get more info on it the Euro is likely to remain elevated compared to where it was a month ago. GBP/EUR trades at 1.1740.

We expect a range today in the GBP/EUR rate of 1.1690 – 1.1840

Aussie and Kiwi Dollars:

The Aussie and Kiwi have risen after the FOMC with AUD/USD up at .7670 and NZD/USD at .7310 reversing some of the losses incurred after Tuesday night’s woeful Unemployment print. Australia saw better than expected Building Approval and Trade Balance data overnight giving extra impetus to the local dollar. GBP/AUD is at 1.6550 and GBP/NZD at 1.7370.

We expect a range today in the GBP/AUD rate of 1.6490 – 1.6675

We expect a range today in the GBP/NZD rate of 1.73 – 1.7480

Data Releases

AUD: No data

EUR: ECB President Draghi Speaks

GBP: Construction PMI; BoE Inflation Report, Monetary Policy Summary; BoE Governor Carney Speaks

NZD: No data

USD: Unemployment Claims

 

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