USD Jumps on Fed

The dollar jumped as the Fed signalled a third rate hike this year is still in the cards and said it would start unwinding its balance sheet in October. As expected, it kept interest rates on hold. Softer inflation has weighed on rate hike expectations, but the CME FedWatch Tool now indicates that markets are pricing in over a 70% chance that the Fed will hike in December.

Previous Day's Market Highlights

The dollar jumped as the Fed signalled a third rate hike this year is still in the cards and said it would start unwinding its balance sheet in October. As expected, it kept interest rates on hold. Softer inflation has weighed on rate hike expectations, but the CME FedWatch Tool now indicates that markets are pricing in over a 70% chance that the Fed will hike in December.
 
Sterling-dollar, after spiking above 1.3600 for the second time yesterday to a new high since the day following the referendum, fell approximately 1% to below 1.3500. Euro-dollar fell over 1% to around 1.1870, its lowest levels since 14 September.
 
Earlier in the morning, the pound jumped on above-forecast August retail sales, with gains attributed to higher prices and spending on non-essentials. Sterling-dollar rallied above 1.3600 and sterling-euro rallied above 1.1300.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1353 1.1397 1.0745 5.72%
GBP / USD 1.3507 1.3664 1.2777 6.49%
EUR / USD 1.1896 1.2093 1.1773 2.65%
GBP/AUD 1.6969 1.7006 1.6165 4.95%
GBP / NZD 1.8471 1.8742 1.7684 5.65%
GBP / CAD 1.6685 1.6710 1.5837 5.22%

Today's Market Highlights

ECB President Draghi speaks this afternoon (14:30 BST). Draghi will give the opening remarks at the European Systemic Risk Board annual conference. His comments will be closely watched for any implications for monetary policy.
 
Sterling traders will keep an eye on this morning’s Public Sector Net Borrowing release (09:30 BST), but attention is primarily on tomorrow’s speech from Prime Minister May in Florence.
 
In the afternoon, the US releases weekly Initial Jobless Claims, which typically has limited market impact but could put pressure on the dollar if it breaks above the 300K mark. Hurricanes Harvey and Irma have affected recent figures. The Philadelphia FedManufacturing Index is also forecast to dip (13:30 BST).

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Public Sector Net Borrowing (Aug) £6.50B £-0.76B
10:30 EUR ECB's Praet Speaks
13:30 USD Initial Jobless Claims (Sep 8) 300K 284K
13:30 USD Philadelphia Fed Manufacturing Survey (Sep) 17.2 18.9
14:30 EUR ECB President Draghi's Speech
15:00 EUR Preliminary Consumer Confidence (Sep) -1.5 -1.5
02:30 AUD Building Permits YoY (Aug) -13.9