Mike Paterson’s daily Forex brief
Last night the US Federal Reserve left interest rates on hold as expected at 0% – 0.25% but extended Operation Twist (swapping short-term bonds for longer-term ones) until the end of the year.
The programme is worth $267 billion and designed to cut the long-term borrowing costs for business and household alike but falls short of QE3, which we can safely say is now being held in reserve for more critical times despite a gloomy forecast given by Fed Chairman Bernanke.
Market reaction has been muted but traders will start to price in further easing. EURUSD initially rose but capped at 1.2720 and is now back down around 1.2660 again after weaker than expected PMI data earlier. GBPUSD had a smaller rally but is still clinging to the 1.5700 level as I type having dipped lower overnight.
EURGBP continues to range-trade too and has moved back lower after failing to breach 0.8100 resistance ( GBPEUR 1.2345 support ) while elsewhere the Pound is little changed except higher against a weakening Yen.
Stronger than expected UK Retail Sales out just now have brought a few GBP buyers to the table.
The Greeks appear to have formed a government of sorts and their first task will be to try and extend the bailout terms from two to four years.
Remaining data today includes US jobs and housing figures but little else to inspire much movement.
May as well get yourselves along to Royal Ascot as I’m sure many of you are anyhow, but take a brolly!
Longest day of the year and it feels like it already…….
Interbank Rates 08:46 BST
Today’s Data: BST
09.30-UK – Retail Sales
11.00-US – CBI Industrial Trends Orders
13.30-US – Weekly Jobless Claims
15.00-US – Existing Home Sales
17.00-EU – ECB President Draghi speaks
Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.