Fed in Focus

GBP picked up yesterday. Fed in focus today

Previous Day's Market Highlights

Sterling threw off the pressure seen Monday and picked up ahead of testimony from BoE Governor Carney before the Economic Affairs Committee. Sterling-euro held above 1.13 to test 1.14, while sterling-dollar regained 1.41. The weaker dollar and euro strength, in part stemming from strong Q4 and 2017 economic growth figures, pushed euro-dollarback above 1.24.
 
The dollar had a relatively muted reaction to President Trump’s State of the Union address last night. Trump focused on immigration, infrastructure, and the economy, calling for a more united America.  
 
After a disappointing Q4 CPI print, the Australian dollar weakened. This saw sterling-Aussie jump above 1.75.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.14398 1.1512 1.1197 2.72%
GBP/USD 1.4185 1.4346 1.3458 6.19%
EUR/USD 1.2444 1.2538 1.1915 4.97%
GBP/AUD 1.7533 1.7722 1.7098 3.52%
GBP/NZD 1.9188 1.9466 1.8613 4.38%
GBP/CAD 1.7428 1.7646 1.6757 5.04%

Today's Market Highlights

Eurozone data are in focus first today (10:00 GMT). Inflation is forecast to have slowed in January, and the Unemployment Rate to have held steady at 8.7% in December. A subdued inflation print could weaken the euro as it would further push back expectations of an ECB rate rise.  
 
The main data releases this afternoon are the US’s ADP Employment Change and Canada’s monthly GDP (13:30 GMT). A pick up in Canada’s economic growth could strengthen the loonie this afternoon.   
 
Investors will primarily be waiting for this evening’s Fed meeting (19:00 GMT), the last under Chair Yellen. The Fed is widely expected to keep interest rates on hold at a target range of 1.25% to 1.5%, which means that investors will be focusing on any changes in the guidance provided.
 
With no press conference or updated economic forecasts at this meeting, any such shifts would occur in the language of the monetary policy statement. The dollar could strengthen if the Fed strikes a relatively upbeat tone on the economy and takes a hawkish view on rate hikes for the year. Markets are currently pricing in the next hike in March, with odds at around 77% according to the CME FedWatch Tool.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Eurozone Unemployment Rate 8.7% 8.7%
10:00 EUR Preliminary Eurozone CPI YoY (Jan) 1.3% 1.4%
10:00 EUR Preliminary Eurozone Core CPI YoY (Jan) 1.0% 1.1%
13:15 USD ADP Employment Change (Jan) 185K 250K
13:30 CAD GDP MoM (Nov) 0.4% 0.0%
14:45 usd Chicago Purchasing Managers' Index (Jan) 64.1 67.8
15:00 USD Pending Home Sales MoM (Dec) 0.4% 0.2%
15:00 USD Pending Home Sales YoY (Dec) -0.2% 0.6%
15:30 USD EIA Crude Oil Inventories (26 Jan) -0.100M -1.071M
19:00 USD Fed Interest Rate Decision 1.5% 1.5%
19:00 USD Fed's Monetary Policy Statement
00:30 AUD Building Permits YoY (Dec) 17.1%

Caxton