There really wasn’t very much to yesterday’s session. The day started softly in Europe with stocks opening weak but they soon found their footing as major bourses in Europe closed the day just slightly higher. The US session was somewhat more active with stocks surging from the open, the S&P closing up .66% and at record highs once more. The euro was weak through much of the morning with EURUSD looking to press towards 1.1700 area before recovering in the afternoon as the USD turned over and showed some weakness. The USD index eventually closing the day slightly lower as broader USD selling took over through the afternoon. GBP was moderately firmer on the day but all in all aside from US indices moves were relatively limited. Overnight sentiment has remained firm with fresh record highs posted in Asian stocks, the Nikkei was up almost .5% and the JPY was also firmer. Today’s focus will be on the UK budget and later in the evening the minutes from the last FOMC meeting will take center stage before the US breaks for Thanksgiving holidays.
Its budget day in the UK and with that there will be some risks to GBP as details emerge as to what exactly the Chancellor has in store for the UK. There was some positive headlines stemming from government talks and markets are beginning to see some of the Brexit concerns lift of GBP, albeit only slightly. Whether the Chancellor directly addresses Brexit in the budget remains to be seen but any sign of caution or concerns about UK finances in the post Brexit environment will be negative for GBP. GBPUSD has been looking to press towards 1.3300 in recent days and a break above 1.3280 will likely see a press towards highs around 1.3325/35 area. A break above there would be very bullish for GBP and we’d be looking back towards 1.3500 area. Any move lower in GBPUSD should find some buyers ahead of 1.3030. EURGBP has been all about the range, any rally above .9000 has found sellers, while any move lower has been held up at .8730/40 area. A break out of the range is key for some continuation in EURGBP, otherwise we remain range bound with some chop around in the middle.
Later in the session focus will be stateside but we’re not really expecting too much from the FOMC minutes either. Fed officials have been pretty consistent in their rhetoric, in that they will look to raise interest rates if they see fit. We have seen the USD index trade back from its October highs in line with a pullback in US treasury yields as markets pull back on their expectations of a rate hike. Markets are closer to 50/50 at this point but that then leaves the USD open to some risk either way. Should the minutes sound more hawkish than recent pricing might suggest then there is certainly scope for a USD rally higher. Janet Yellen has said she will step aside when Powell takes over the reigns as Fed chair. Powell has been somewhat more hawkish than Yellen in the past but currently they appear to be more aligned and as such Yellen may not want to rock the boat before her departure. Should that happen there is certainly downside risk for the greenback. EURUSD is another pair playing a range between 1.1800 area and 1.1650. Any rally above 1.1800 has quickly run into sellers while any move lower has lacked USD support to break back towards 1.1600. It feels like the market is waiting on further details from the Fed to decide what direction to move, we know the stance of the ECB at this point, but its unlikely tonight minutes will shed too much light.