Fed Hikes; US Data, Central Bankers in Focus

The Fed hiked rates as expected. Today, the latest Brexit and trade headlines remain key, as well as a raft of US data and central bank speeches.

Previous Day's Market Highlights

As was widely expected and priced in, the Fed hiked interest rates by 25 basis points yesterday, bringing target rates up to 2.00-2.25%. The Fed removed the word “accommodative” from its statement and projected a fourth rate hike this year, three next year, and one in 2020. The dollar traded in both directions, ultimately gaining following the press conference as Fed Chair Powell downplayed the removal of “accommodative”. The Fed’s projected rate path may have been more hawkish than some investors had expected.
 
The RBNZ also acted as expected, keeping interest rates on hold at 1.75%. The kiwi saw a knee-jerk move higher but ultimately pared gains. Elsewhere, renewed Brexit concerns kept the pound under relative pressure and away from recent highs.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1217 1.1302 1.0996 2.71%
GBP/USD 1.3137 1.3298 1.2785 3.86%
EUR/USD 1.1706 1.1815 1.1526 2.45%
GBP/AUD 1.8176 1.8401 1.7508 4.85%
GBP/NZD 1.9777 2.0031 1.9150 4.40%
GBP/CAD 1.7143 1.7190 1.6596 3.46%

Today's Market Highlights

The euro has been under pressure this morning, falling to a one-week low against the dollar on reports that Italy’s budget meeting is likely to be delayed. The single currency will remain vulnerable to the latest headlines throughout the day. Data highlights for the euro include a projected dip in Business Climate (10:00), which could see further currency weakness this morning, while a pick-up in Germany’s Harmonised Index of Consumer Prices (by 13:00) could later lend the euro some support.
 
On the dollar side, data are looking positive, with weekly Initial Jobless Claims forecast to remain low, the final estimate of Q2 GDP expected to confirm an acceleration in growth to 4.2%, and Durable Goods Orders forecast to have increased (13:30). The data could see the dollar strengthen this afternoon. CAD traders will keep an eye on the latest NAFTA headlines after reports overnight that Trump had rejected a meeting with Trudeau. Brexit headlines will remain the key driver for the pound, particularly amidst a light calendar day.
 
It’s a busy day for central bank speeches, which markets will watch closely for any policy clues. ECB President Draghi will give the opening remarks at the European Systemic Risk Board annual conference (14:30). BoE Governor Carney will later chair a panel on Sustainable Finance at the conference. Fed Chair Powell is speaking at the Rhode Island Business Leaders Day (21:30). BoC Governor Poloz will be speaking on digital technologies, which may have a limited impact on the Canadian dollar unless there are implications for monetary policy.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00am EUR Business Climate (Sep) 1.19 1.22
10:00am EUR Consumer Confidence (Sep) -2.9 -2.9
10:00am EUR Economic Sentiment Indicator (Sep) 111.2 111.6
12:45pm GBP MPC Member Haldane
1:00pm EUR Harmonised Index of Consumer Price YoY (Sep) 2.0% 1.9%
1:30pm USD Initial Jobless Claims (14 Sep) 210K 201K
1:30pm USD GDP Annualised (Q2) 4.2% 4.2%
1:30pm USD Durable Goods Orders (Aug) 2.0% -1.7%
1:30pm USD Core Durable Goods Orders (Aug) 0.5% 0.2%
2:30pm EUR ECB President Draghi Speaks
3:00pm USD Pending Home Sales MoM (Aug) -0.4% -0.7%
3:00pm GBP BoE Governor Carney Speaks
5:00pm EUR ECB's Praet Speaks
5:30pm USD Fed Member Kaplan Speaks
9:30pm USD Fed Chair Powell Speaks
10:45pm CAD BoC Governor Poloz Speaks
11:45pm NZD Building Permits s.a. MoM (Aug)
12:01am GBP Gfk Consumer Confidence (Sep) -8 -7

Caxton