GBP/EUR 1.1909 (0.8397)
Any analysts looking for taper to begin in December may have been left disappointed again yesterday as yet another Fed speaker, this time William Dudely coming out in favour of keeping the current stimulus package in place. He stated that there was not yet enough growth momentum to give the Fed confidence in the labour market outlook. The Bank of New York President also anticipates that monetary policy will be accommodative for a considerable period of time, and shares incoming Fed President Janet Yellen’s view that there is no evidence of asset bubbles.
We also had minor releases out of the US yesterday. One of these was the NAHB Housing Market Index which showed builder confidence steadied for the month of November, and remained unchanged from a downwardly revised level of 54 for October. The fact that the figure remains above 50 and for the sixth consecutive month is an encouraging sign as it shows more builders have viewed market conditions as good rather than poor.
We have a more Fed speakers due to voice their opinion on the US economy today, but the market will have to wait for tomorrow’s FOMC minutes to see the whole picture. As a result the US Dollar remained on the back foot against its main peers and opens this morning not far off last night’s lows of 1.3543 and 1.6128 versus the euro and pound respectively.
Meanwhile Sterling gave back some of the recent gains against the euro as Monday saw improving eurozone trade data. The eurozone’s trade surplus was 13.1 billion euros in September, versus €6.9bn last month. The Euro as a result crept higher, rising 0.3 percent to a .8397 high. The single currency has stayed well below the late October peak of .8585, since the European Central Bank cut interest rates earlier this month. In comparison, sterling has enjoyed a good run and is up nearly 4 percent since early August versus the euro. Last week’s quarterly growth and inflation forecasts from the Bank of England raised the prospect of a rate hike in 2015 after a run of stronger UK economic data. Many analysts are still fuelling speculation that the BOE will go against their original stance and raise interest rates sooner than originally stated. This Wednesday should shed some light on how upbeat policy makers are as the BOE will release the minutes from their last MPC meeting. There seems to be a mixed view on where Sterling is to go from here with many traders believing that positive economic data has already been factored in.
Today sees no data for the UK and only German ZEW Economic sentiment at 11.00am for the EU which is forecasted to show a 54.6 reading, this report which is a leading indicator of economic health in Germany, has beat analysts’ expectations consecutively since mid-August. It Seems traders with interests in GBP will have to wait until Wednesday for some economic news in the form of MPC minutes.