General market theme
Traders’ attention was on the US dollar yesterday in light of the release of the minutes from the latest Fed meeting on monetary policy. The sentiment in the market was that the Fed policymakers were concerned about the effects that the recent market volatility could have on the domestic economy and would be reserved on raising their key interest rate even more in the next few months.
Indeed the FOMC minutes revealed their relatively bearish views about the domestic inflation and the effect that current market conditions might have on the economy and there was no hint for more tightening at this time. However the dollar failed to react to this news which makes it clear that market participants expected that development but also limits the dollar’s outlook since traders have such a bearish view for the US currency.
Price action highlights
The euro remained consolidated over the past 24 hours trading within the sideways formation it had formed since the beginning of the week. The European currency has been stuck between the 1.1100 and 1.1200 levels looking for fresh stimulus to break out, the interesting thing to keep in mind here though is that there are equally bearish views for both the euro and the dollar at this time and the tug of war is played to see which currency is weaker rather than stronger than the other.
The cable traded sideways as well yesterday but with increased volatility as the effects from the UK employment data combined with the FOMC minutes made investors nervous. The UK currency remained between the 1.4250 and 1.4350 levels looking for direction but as long as the dollar remains weak and the pound doesn’t get enough support we will continue to see choppy price action and sudden changes in direction from the UK currency.
Focus of the day
Today we will focus our attention on the release of the ECB minutes from their latest monetary policy meeting in order to get more insight on what the European policymakers have in mind. We do not expect to find anything new or exciting in the minutes and with no tier-1 reports from the US scheduled for release either we should continue to see choppy trading action for the day ahead.
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