Mike Paterson’s Daily Forex Brief
Last night’s release of the Minutes from the recent FOMC meeting showed a real consensus that further monetary easing in the US was on its way and the markets were quick to respond.
Highlighting this current stance was the following passage, “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery” and only one member said QE3 would not improve the outlook. Traders and analysts now expect further easing as soon as the September FOMC meeting.
There has indeed been better than expected jobs data for July since the meeting was held but this seems unlikely to change the scenario and it appears the Fed will not wait for much longer.
The two favoured sons of such a move, the Yen and Gold, rose sharply on the news with USDJPY falling like a stone reaching a low of 78.46 thus far and Gold has rallied to $1667.
But it was a general USD sell-off and so far this morning EURUSD has seen highs of 1.2553 and GBPUSD has also risen sharply to 1.5909 as both pairs finally break out of summer trading ranges. Both pairs have strong technical resistance at these levels so this morning’s action may well prove crucial in the short-term.
EURGBP has been kept in its range of the past couple of days but is consolidating above key support around 0.7875 (GBPEUR resistance 1.2698) and could be looking to try and break the next big upside level at 0.7910-20 (1.2625-40) again but it will prove a tough nut to crack having made a couple of attempts already this week.
Elsewhere the Pound has provided a mixed bag of results (see rate table below) but little change in effect as attention remains firmly on the US $. This morning’s mortgage approvals and CBI distributive trades data may have impact though.
Also this morning we have the French and Germans considering the Greek’s request for more time to pay off their debts but the sound bites thus far do not auger well. i.e. the German Finance Minister “more time is not a solution”. Ironic really given the can kicking from the EZ’s finest that’s been going on for months. Hey ho…
Expect a lively day anyway as the dust settles.
How good was Frankel yesterday in winning his 13th consecutive race over the longer distance. And yes you eagle-eyed footie fan followers of this blog will have spotted the mighty Shrimpers rooted at the bottom of League 2 after two defeats from two games. But hey, there’s a long way to go yet. We’re just giving the others a head start to make it more interesting!
Interbank Rates at 07:54 BST
Today’s Data: BST
09.00-EU – Eurozone Manufacturing PMI (Prov)
09.30-UK – BBA Mortgage Approvals / CBI Distributive Trades Survey
13.30-US – Weekly Jobless Claims
15.00-US – New Home Sales
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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email firstname.lastname@example.org
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.