Daily Analysis: Market Braces For Fed Interest Rate Decision

Our daily analysis of EUR, GBP and USD.

DAILY ANALYSIS

USD

• Retail Sales was released yesterday afternoon by the Fed, coming out at 0.6%, higher than the initial 0.2% the market had previously predicted. This is a positive signal for the Greenback as stronger consumer spending within the US economy reduces the pressure on the Fed to cut interest rates later today.
• The market braces for an important day for the Dollar, with the highly anticipated Interest Rate Decision being released this evening, analysts are keen to see what the Fed says in the hours following the announcement, many expecting Powell to address the autonomy of the Fed. With markets already pricing in a 25 bp cut, any deviation from this figure could trigger volatility surrounding key currency pairs, all of which is especially sensitive to Powells tone in the press conference this evening.

EUR

• Yesterday was a largely subdued day for the Euro with the ECB’s Villeroy and Escriva speaking in the morning, however the market remains cautious with the policymakers providing too much optimism regarding rate cuts.
• A relatively quiet day for the Euro, with no major economic data releases. However, the market will be tapping into the ECB’s President Lagardes speech this morning, hoping to obtain insight as to whether policymakers intend to maintain the current rates, or if concerns around slowing growth could push for a more dovish tone.
• EUR/USD advances further, trading above the 1.1855 mark at the open this morning, its highest observed level since July coming off the back of bullish data announcements from the Dollar.

GBP

• A busy morning for the Pound to start the day off, as we see CPI being released 0.1% lower than analysts had predicted, coming out at 3.8%. This softer than expected announcement suggests to the market that inflationary pressures are gradually easing within the UK.
• GBP/USD trades around 1.3631 at the open this morning, with the market beginning to price in the BoE’s Interest Rate Decision tomorrow, in which a change in the current rate of 4% could create large levels of volatility for the Pound.

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