All eyes on the Fed

Today’s macro highlights:

  • USD – FOMC meeting minutes

All eyes on the Fed

Sterling continued its run yesterday, helped by ongoing Dollar weakness, to approach a two-week high. As negotiations in Brussels continue, investors remain on tenterhooks. It seems increasingly unlikely that a deal will be brokered any time soon, opening the door for ongoing volatility in the single currency. The release of public sector net borrowing, which showed a net gain for the government, and the CBI Industrial Trends data, which deteriorated somewhat, was of little consequence to the currency on the day. Meanwhile, Dollar investors lost appetite for the Greenback as Trump’s criticism of rate hikes continued to weigh on sentiment. The Euro remained under pressure amid ongoing uncertainty in the region, particularly stemming from Turkey and Italy.

In another data-light day, the main event is the release of the Federal Reserve’s August FOMC meeting minutes. Investors will be watching closely for any sign that the authorities could be planning on implementing more rate hikes this year. The Greenback may well trade higher in the lead up to the release, amid optimism that this will be the case.

GBP/USD

GBP/USD continued to climb higher on the day, helped by ongoing Dollar weakness. With no significant data due for release and a bank holiday on the horizon, we could see a rise in volatility as investors react to Brexit headlines over the coming days. A recovery in the Dollar would see the pair trade lower however, and this may well be the case today given the imminent release of what’s likely to be a hawkish account of the Fed’s August meeting.

EUR/USD

The EUR/USD was also aided by Dollar weakness. This could reverse if the Dollar gains on hawkish Fed FOMC meeting minutes or if investors take fright once more at what’s happening in Europe.

GBP/EUR

There wasn’t much movement for the cross on the day. Geopolitical risk will be behind any movements in the coming days, given a relatively light economic calendar. Affirmation of the European Central Bank’s cautious stance when it releases its account of the latest meeting tomorrow could weigh on the common currency, to the benefit of the cross.