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  • richard evans

Fed announce taper without the tantrum

Good morning

For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

US clocks change this weekend, we’ll be back to normal on Monday

The Fed managed to announce their reduction of asset purchases by US$15billion/ month without spooking the markets. By mid-2022 purchases should be zero although Fed did make it clear they can and will change the pace of purchases depending on economic conditions. That could go either way of course so difficult to read anything into that other than they will remain flexible. US dollar broadly unchanged on the release after some initial weakness, while US equities ended the day in positive territory.

Asian markets were also positive overnight despite the news that another Chinese property firm, Kaisa, has missed a payment on a wealth management product. Shares in Kaisa feel sharply over worries about cash flows and high debt levels.

With Lagarde sounding more dovish than at the ECB meeting last week, EUR is trading down at 1.1555. GBP has made a little ground on both the USD and EUR, now at 1.3645 and 0.8470 (GBPEUR 1.1805) respectively.

BoE rate announcement at midday today and there seems little doubt we’ll see a 0.15% rise even though a recent Bloomberg poll put the chances of no rise/25 bps rise at almost 50% each. I’d imagine even if rates did remain unchanged today, it would come with some indication that the move could come in December instead. GBP should see some gains if rates are raised but a lot depends on the accompanying statement and whether it pushes the ‘one and done’ idea or opens the door for further moves. Likewise GBP could fall if no rate change today but that move could be tempered if they signal a rise for December.

Also of interest today is the meeting between UK and France over fishing licences. France has released a British trawler that had been impounded last week but expect more retaliation from France if UK don’t give some ground here.

Poland raised rates 75bps to 1.25% which helped push EURPLN from around 4.60 to 4.58, after an initial knee-jerk reaction that saw the pair trade below 4.57. This morning we have seen EURPLN tick back up towards 4.5900. The Polish central bank made it clear they would do whatever it takes to curb inflation which they see as hitting 7% in January. Further rate rises on the cards, another rise in December is likely.

I had my booster jab yesterday. My previous two had been AstraZeneca, this time it was Pfizer. I’d had some reaction to the AZ vaccine, the first knocked me out for a day or two, the second I just felt a bit poorly for a week or so. I don’t know anyone who had a reaction to the Pfizer jab, so imagine my disappointment when I awoke this morning feeling a little worse for wear. Some say it’s a good thing if you experience a reaction as it means its working, however I liken this to those who say its good luck to be pooed on by a bird. Just a poor attempt at consolation I reckon.

- 09.00 Norges bank rate announcement

- 09.00 EU markit services PMI

- 09.00 EC economic growth forecasts

- 09.30 UK markit construction PMI

- 10.00 EU PPI

- 12.00 BoE rate announcement

- 12.30 BoE press conference

- 12.30 US initial jobless claims

- 13.00 ECBs Lagarde speaks

- 00.30 Japan household spending

- 01.30 RBA monetary policy statement

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