United States Dollar: The FOMC did not fail to deliver yesterday evening. The Fed announced that it will purchase $40 billion of open ended mortgage-backed securities per month and on a side note they left the Fed Funds rate on hold at 0.50%. This comes in addition to continuing to buy longer term bonds (by way of “operation twist”). At $40 billion per month it was less than investors were expecting but the USD has weakened and risk is on as a result of Bernanke later stating during his press conference that the Fed will leave the door open to further asset purchases should it become necessary and economic data, including employment numbers fail to show any improvement. GBP/USD opens much higher this morning as a result at 1.6195 and is now threatening a convincing break of the 1.6200 figure. We have more potentially market moving news on the way today too by way of Core CPI, US Retail Sales and Consumer Sentiment and so will are likely to see volatility to continue in to the end of the week.
We expect a range today in the GBP/USD rate of 1.6120 to 1.6260
Euro: With QE3 here investors have responded positively and risk has rallied. EUR/USD has broken through 1.3000 and traded to high of 1.3051 early on today. It is still here or hereabouts and opens this morning at 1.3025, the first time that it’s been up at 1.3000 since end of April/start of May this year. The single currency has undeniably been supported by positive vibes from Europe during the week too, including the result of the Dutch election and the German high court decision on ESM. As out head dealer in Toronto said yesterday though “The ECB & FED, however, appear to be ready & willing to supply more sugar loaded cookies to the market in hopes that it will spur good behaviour. All I will say is I have 4 kids….sugar is not a long term fix and never results in good behaviour”. The euro remains firm vs. the pound and GBP/EUR opens at 1.2430. European Finance Ministers will be attending meetings today and over the weekend to discuss recent events within Europe and the state of peripheral finances. Moreover finance ministers are pressing Spain to confirm if the country will be asking for more aid following the announcement of the ECB’s new bond buying programme earlier in the month.
We expect a range today in the GBP/EUR rate of 1.2405 to 1.2510
Aussie and Kiwi Dollars: The focus for world markets has of course been on the FOMC decision to increase QE. With equities up, commodity prices higher and risk on both AUD/USD and NZD/USD have rallied. AUD/USD is knocking on the door of 1.0600 now whilst NZD/USD has gapped through the high .82’s and trades at .8350 this morning. The rally is all risk related and there’s been no local data released overnight worth mentioning. The next focus for AUD and NZD traders will be US CPI and news from the Eurogroup meetings over the weekend. GBP/AUD and GBP/NZD trade at 1.5300 and 1.9400 this respectively.
We expect a range today in the GBP/AUD rate of 1.5240 to 1.5390
We expect a range today in the GBP/NZD rate of 1.9320 to 1.9510
AUD: No data released
EUR: CPI, Employment Change
GBP: No data released
NZD: No data released
USD: CPI, Retail Sales, Industrial Production, Consumer Sentiment, Business Inventories, Inflation Expectations
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