Fed Leaves Door Open for March Hike

The Fed kept rates on hold and the door open for a March hike. Attention today is on manufacturing data

Previous Day's Market Highlights

Once again, sterling caught a bid tone around the 4pm fixing, helping it to further reduce morning losses. Sterling-euro regained 1.14 and sterling-dollar 1.42.
 
US ADP Employment Change surprised to the upside but had a muted impact on the dollar as markets focused on the upcoming central bank meeting.
 
As expected, the Fed kept interest rates on hold last night at a target range of 1.25% to 1.50%. It left the door open for a March hike, signalling confidence in the economy and expectations that inflation will accelerate this year. The dollar was firmer on the upbeat tone, briefly pushing back below 1.24 against the euro.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1445 1.1512 1.1197 2.72%
GBP/USD 1.4195 1.4346 1.3458 6.19%
EUR/USD 1.2403 1.2538 1.1915 4.97%
GBP/AUD 1.7719 1.7722 1.7098 3.52%
GBP/NZD 1.9333 1.9466 1.8613 4.38%
GBP/CAD 1.7490 1.7646 1.6757 5.04%

Today's Market Highlights

Manufacturing data are in focus today. Following the Eurozone’s PMIs this morning, attention will be on first the UK figure (09:30 GMT) and then the US (ISM reading at 15:00 GMT). An expected picked up in the UK’s Manufacturing PMI could add further support to this morning’s sterling bid tone, while a projected dip in the US ISM Manufacturing PMI poses a risk to the dollar this afternoon.
 
Other US releases include weekly Initial Jobless Claims and quarterly Nonfarm Productivity (13:30 GMT), both forecast to weaken off slightly.
 
After the Fed meeting, the main event for the dollar this week is tomorrow’s January jobs report, which often sees market volatility. Of particular interest are the Nonfarm Payrolls and Average Hourly Earnings figures. Strong readings here could strengthen the dollar as the week draws to a close.
 
The highlight next week is Thursday’s Bank of England meeting, which investors will watch for monetary policy clues. The Bank has cautioned that future rate hikes will likely be gradual and limited, and markets have not priced in a second hike until late in the year.  

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Markit Manufacturing PMI (Jan) 56.5 56.3
13:30 USD Initial Jobless Claims (19 Jan) 238K 233K
13:30 USD Nonfarm Productivity (Q4) 1% 3%
14:30 CAD Markit Manufacturing PMI (Jan) 54.8 54.7
14:45 USD Markit Manufacturing PMI (Jan) 54.9 55.5
15:00 USD ISM Manufacturing PMI (Jan) 58.8 59.3
21:45 NZD Building Permits s.a. MoM (Dec) 10.8%

Caxton