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Calm markets await FOMC statement

By Jake Trask

It was a very subdued start to the week yesterday with most major currency pairs trading in a narrow range. With little top tier data due today and the beginning of the holiday season its likely to be another relatively quiet session before things get going tomorrow. Mondays one print of note from the States was a slightly off-target Existing Homes Sales number with an annualised 5.52M being shown for June. Wednesday sees preliminary second quarter GDP estimates from the UK with an underwhelming 0.3% growth expected from last quarters lacklustre 0.2%. After six months of stubborn resilience after the EU membership referendum vote, 2017 has seen the UK economy finally falter in the face of rising inflation and uncertainty due to the UK’s decision to leave the bloc. Later in the day and this week’s main event for the fx markets is the latest FOMC interest rate decision and statement from the Fed. It’s all but certain rates will be kept on hold however the accompanying text may indicate that due to the recent run of poor data from America we may be on hold for the rest of the year. Expect some volatility around 7pm. GBP/USD trades at 1.3025.

Yesterday saw the latest set of PMI figures from the Eurozone with slight fall in most of the major surveyed sectors. German manufacturing saw a bigger than expected fall to 58.3 from last month’s stellar 59.6 which closed out the best quarter for German factories in six years. An improving picture in France was also confirmed with its manufacturing PMI coming in at 55.4, its best reading since May 2011. EUR/USD trades at 1.1650 and GBP/EUR is at 1.1180. 

The Aussie has kept its head above 79 cents throughout the week against the greenback and could make a play for 80 should tonight’s inflation data beat forecasts. Quarterly CPI is expected to fall slightly from 0.5% to 0.4% with the Trimmed Mean reading predicted to stay at 0.5%. GBP/AUD trades at 1.6410

In a week devoid of local data the Kiwi is range bound and will look to tonight’s Aussie inflation figures and tomorrows FOMC release for direction. NZD/USD is at .7430 and GBP/NZD is at 1.7525.