FX Market Update 15th October 2010
US monetary policy is proving to be the key focus in the markets at the moment. Most Traders are paying particular attention to Wednesday’s release of the Fed’s latest beige book. This will provide the basis for discussion at the November FOMC meeting when markets expect fresh quantitative easing measures.
On a technical front the USD is making losses on a daily basis against the majors. Today the GBP/USD pair has broken the 1.61 level for the first time since the end of January. EUR/USD is looking like it will close over 1.40 with gains on towards the mid 1.40’s next week now looking more likely.
US Retails Sales today climbed more than previously forecasted for Septemeber. This has helped to ease concerns that a dip in consumer spending could weaken the economic recovery in the US.
Stock markets are fairly flat on the day with risk appetite slowing. Bernanke has justified the upcoming stimulus package stating that additional monetary stimulus is necessary with inflation being soo low (close to 0%) and unemployment rates being soo high (10%).
In the UK next week, the key focus will be the minutes of the BoE’s last meeting. Although policy was left unchanged the minutes could represent a deepening divide amongst MPC members. There is a possibility that a three way split with Andrew Sentance calling for a rate hike, Adam Posen voting for QE and other members falling on the line between. The minutes could potentially weigh heavily on the pound particulary vs the Euro.
The UK will face house price data, retail sales, and austerity measures stipulating how the UK government intends to reign in the UK budget deficit next week. We will undoubtedly see volatillity with most analysts signalling that the pound could be in for a rough ride next week.
Support and Resistance
GBP/USD – Resistance 1.6105 / Support 1.5754
GBP/EUR – Resistance 1.1717 / Support 1.13-1.1320
EU-16 – Finance Ministers meeting (continues to Tuesday 19th)
UK – Rightmove house prices (October) 0001
JPN – Tertiary Industry Index (August) 0050
US – TICS Capital Inflows (August) 1400
US – Industrial Production (September) 1415
US – NAHB House builders’ Sentiment (October)
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