Fed commits to QE finishing in October. Market awaits todays BoE IR decision

Claire Hogarth10/Jul/2014Currency Updates

GBP

London closed with sterling flat against the dollar and a touch down against the euro.

Volumes were down as most in the market awaited the release of the Fed minutes and Draghi’s speech in the evening.

Fresh data from the property market showed that the soaring London and SE market is cooling whilst the rest of the country remains solid. Demand in the capital dipped for the second month on the bounce with prices either flat or in reversal. Outside London prices remain below the pre recession peak and show movement to the upside.

Key Play today will of course be the MPC IR decision with the curtain set to rise at midday. The city expects no surprises, as ever the focus will lie with the general lyrics and vibe of the meeting. Also UK trade balance set for release this morning.

EUR

London closed with the euro retracing a shade against sterling and a little uptick against the greenback.

Traders mostly waited for Draghi’s speech in the evening. In the past Draghi’s capricious comments have rocked the market – hence why we typically see a reduction in weighty positions prior to his speeches.

Yesterday’s comments didn’t really move the markets but they did move eyebrows. Draghi called for Brussels to be given increased power to intervene in struggling Eurozone, countries economies. He went on to say that this would be done with the aim of stabilising the monetary union. Juggling 18 nations with different economies but the same currency was supposed to be easy but has proven a nightmare.

Germany is big backer of the proposal and yet again they look set to score – their idea of forcing struggling economies to reform their labor and pension market is enjoying increased support.

French industrial output figures again came in flat/ EUR price not moving but well supported across the board – no other data today.

USD

London closed with the dollar mostly flat across the board – the Fed minutes were fairly unspectacular and basically reaffirmed the Fed view that QE will be done by October. Yellen remains focused mostly on the labor market. Last weeks strong NFP print was encouraging but plenty of questions remain. US stocks scuttled up a little following the comments but the shift was minor.

The Fed has been slowing its asset purchases at clips of $10B every meeting this year and $35B remains on the table, this left doubt over whether the purchases would end in October or December – crucial for judging when the first increase in IR might arrive. The minutes stated QE will end with a clip of $15B in October unless the economy sees a decisive shift in the state of the US economy. The clarity has been welcomed by the market but the build up to October will surely heighten market focus on the Fed.

US weekly jobless claims and wholesale inventories set for release this afternoon. Expected to the upside.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.