Major currencies move in narrow ranges as appetite for risk returns
30/Sep/2015 • Currency Updates•
Dollar, Sterling and Euro moved in very tight ranges against each other last night as equities and risk assets generally rebounded from their Monday losses in the absence of critical data.
Beyond G10 currencies, we saw hopeful signs in major emerging market currencies, buoyed by a sense that Central Banks are ready to use their massive FX reserves, which were accumulated during the years of investment inflows, to stabilise trading levels.
A very subdued day for Sterling yesterday, which traded in an extremely tight range against the Euro and the Dollar.
Mortgage approvals rose more than expected, which may nudge MPC members towards a more hawkish position – a real estate boom is not something the BoE wants to see right now – but this is more of a second tier indicator and had little effect on financial markets.
The latest revision of second quarter growth in the UK economy will be announced at 9.30am this morning, although no major revision is expected from the 0.7% figure that was previously quoted. This will be accompanied by the current account figure for the three months to June.
Yesterday was also a very quiet trading day for the common currency.
The fallout from the Catalan elections seems to be limited, as one of the separatist parties admitted that failure to reach 50% of the vote meant that it was not time for a unilateral declaration of independence. Confidence indicators came in generally higher than expected, but again with minimal market impact.
The biggest announcement among the major currencies today will be the latest inflation figures in the Eurozone for September, set for release at 10am this morning. The headline rate of price growth has remained around zero, or below, every month so far this year, even following the launch of the European Central Bank’s quantitative easing programme in March. Another weak print this morning will place further pressure on the ECB to expand its QE programme further, a measure that in our opinion would place further pressure on the Euro and send it lower against most of its major peers. A busy day of releases will also see Italian inflation and German unemployment data this morning.
Only second tier reports out of the US yesterday, primarily the Case-Shiller housing price indicators, which came in at levels consistent with a slight slowdown in the rate of price increases, to approximately 5% annualised. This is not far from the level of nominal GDP and should not worry the Federal Reserve.
Next on the agenda for the US Dollar will be another speech from Federal Reserve Chair Janet Yellen, who will be speaking at a conference in St. Louis, Missouri at 8pm UK time this evening. Yellen is not expected to touch on monetary policy; however, any further hints of an interest rate hike this year, such as that we saw last week, would no doubt cause a reaction in the Greenback. A speech by Fed member Williams at 3pm and the latest ADP employment change for September will both also be in focus during the London trading session today.
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