Waiting for the Fed

Equities slide while major pairings remain rangebound ahead of tomorrow's Fed meeting.

Previous Day's Market Highlights

Major pairings remained largely rangebound yesterday as a sparsely populated economic calendar did little to ignite currency markets. Despite the lack of data, the dollar slipped from its earlier highs on fears of the Fed striking a more dovish and cautious tone at Wednesday’s meeting. The greenback lost around 0.4% against the euro and 0.2% against the pound. 
 
The major data release came from the eurozone, with the latest inflation figures showing core CPI remaining flat at 1% year-on-year while headline CPI dipped slightly to 1.9% year-on-year. The euro was unmoved by the news, as the more significant core measure (which strips out food and energy prices) remained steady. 
 
Sterling also traded within a familiar range over the course of the day due to a lack of significant news. A date to note however is the week of Jan 14 when a parliamentary vote on the Brexit withdrawal deal will now be held. Labour leader Jeremy Corbyn has also proposed a motion of no confidence in Theresa May, however this is not a vote in the government so cannot trigger a general election. In addition, the motion is unlikely to be heard until the new year. 
 
Other markets were considerably more volatile with both European equities losing over 1%, while US indices shed more than 2% due to declines in the retail and healthcare sectors as well as growth fears ahead of the Fed meeting.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1138 1.1349 1.1004 3.04%
GBP/USD 1.2651 1.2927 1.2491 3.37%
EUR/USD 1.1357 1.1472 1.1267 1.79%
GBP/AUD 1.7601 1.7818 1.7208 3.42%
GBP/NZD 1.8436 1.8985 1.8183 4.22%
GBP/CAD 1.6955 1.7175 1.6722 2.64%

Today's Market Highlights

The economic calendar is quiet today, with little significant data of note. Therefore, focus is likely to shift to the 2-day Federal Reserve meeting that begins today and associated market positioning ahead of tomorrow’s decision announcement. 

On the data front, US building permits and housing starts are both expected to remain unchanged from the previous month. Both releases are good leading indicators of US economic health due to the wide-ranging follow through effects of the construction industry. 

Other releases include German business climate data for November, forecast to show a slight downtick in economic conditions and the New Zealand current account which is forecast to show a significant widening of the deficit to -5.85bln NZD. 

As mentioned, tomorrow’s Fed meeting is the highlight of this week’s calendar with broad expectations of a 25bp rate hike, however the market will also be paying close attention to tomorrow’s inflation numbers from both the U.K. and Canada.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:00am EUR German Ifo Business Climate 101.7 102.0
1:30pm USD Building Permits 1.27mln 1.26mln
1:30pm USD Housing Starts 1.23mln 1.23mln
9:45pm NZD Current Account -5.85bln -1.62bln