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  • richard evans

FOMC later today, then summer can begin

A very pleasant day of meetings yesterday and if truth be told, a few rather splendid cold beers in the sunshine as well. It doesn’t get much better than that. Mind you I must confess that I feel a bit rotten this morning. Whether I am just out of practice or age is catching up with me I’m not quite sure. The pesky parakeets woke me up again this morning, thanks for the suggestions yesterday of how to get rid of them, most of which involved some sort of firearm. If it goes on like this I’ll have to do something!

USD – Retail sales numbers disappointed yesterday although the previous reading was revised higher which went some way to offset the bad news but not enough to prevent equities slipping lower. The main event today is the FOMC rate announcement. No policy changes expected but attention will be on the ‘dot plot’ which may well suggest a rate move up in 2023.

We also look for any mention of taper discussions. While Powell is likely to make clear now is not the time for tapering, he may allude to the fact that discussion will begin soon. Even if it isn’t in the prepared statement, he’s likely to be asked about it in the Q&A. If the dot plot is unchanged and there is little or no talk of tapering, we are likely to see dollar weaken. Conversely a shift higher in the dot plot plus some taper talk could send dollar higher.

EUR – EURUSD at 1.2130, all very calm and stable, stuck in a pretty tight range. Whether we break out of this range depends very much on the FOMC this evening. The news that US and EU have settled the aircraft buider dispute that has been going on for many years is certainly good news for both sides and should see the threat of tariffs removed. Both sides also vow to tackle ‘non-market practices of third parties’. That’s China to you and I.

GBP – GBPUSD dipped down to 1.4035 yesterday afternoon but has since recovered, trading at 1.4115 as I type. Inflation data this morning was well above expectations, actually above the Bank of Englands target for the first time since July 2019. The official message is still that inflation is transitory. Just how transitory remains to be seen. GBP had struggled against EUR yesterday as well, EURGBP hit 0.8625 (GBPEUR 1.1595) at one point but has since recovered, now 0.8595 (1.1635), with the key 0.8570 (1.1670) area not too far off.

CHF – No often I mention CHF these days but I did notice that we have Swiss trade balance and the SNB financial stability report out early tomorrow morning. EURCHF now 1.0890 having started the month up at 1.1000 and was in mid-1.11s back in March. . SNB will be trying hard to prevent any great CHF appreciation but eyes are on the Jan/Feb levels, below 1.08.

- 10.00 EU labour costs

- 10.00 ECBs de Guindos speaks

- 13.30 US housing starts, building permits

- 13.30 CAD CPI

- 19.00 FOMC rate announcement

- 19.30 FOMC press conference

- 22.00 NZ Westpac consumer confidence

- 23.30 BoCs Macklem speaks

- 23.45 NZ GDP

- 01.00 RBAs Lowe speaks

- 02.30 AUS unemployment, RBA bulletin

- 05.30 SNB financial stability report

- 07.00 CHF trade balance

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