Fed minutes don’t stop the markets selling USD

The minutes from the last Federal Reserve Open Market Committee meeting were released late yesterday. They all but confirmed The Fed will start reducing their bond-buying programme before the end of the year. Even though that is an obvious tightening of monetary supply the US dollar weakened before the close of play on Wednesday it has continued to weaken this morning. Many in the markets are concerned that the Federal Reserve’s view that the current boost to inflation is transitory may well be misguided.

If the Fed has got it wrong, they will need to accelerate their monetary tightening in 2022 and that is playing into the value of the US dollar this morning. GBPUSD is up to 1.3680 at the time of writing; the highest level since the 28th of September. There will be U.S. dollar buyers waiting for 1.3750 so we may be nearing the top of the short term range at the moment. But U.S. dollar weakness can also be seen in the EURUSD rate, this pair has shot up to $1.1600, the highest level in 9 days.

The Japanese yen has lost even more ground after the Bank of Japan committed to maintaining a very loose monetary policy even after the economy has started to recover. That was accompanied by a 3.6% drop in Japan’s industrial production. The GBPJPY rate is up to JPY 155.35 this morning but the USDJPY rate is hampered by the current USD weakness; trading in a flat range just above JPY 113.

China’s PPI boosts AUD, NZD and CAD

We have seen some strength in the currencies of the big commodity producers overnight after Chinese producer price inflation was published at 10.7%. That reflects the rise in coal and other energy prices. So the Australian, New Zealand, and Canadian dollars are all a little stronger this morning.

US employment data awaited

That Australian dollar strength comes despite worse than expected employment data published overnight. The unemployment rate in Australia edged higher to 4.6% but there are fears that some of the policies that restrict job seekers will come to an end soon and the unemployment rate will edge higher still.

UK GDP boosts the Pound

Part of the pound’s good showing Is down to the NIESR forecasting 1.5% growth in the third quarter of 2021. That positive forecast even includes the restrictions but supply chain problems are likely to create. It seems the NIESR believes these to be transitory. so it is somewhat surprising that the pound hasn’t managed to push above EUR 1.18. It is still bashing its head against that ceiling this morning, so I wouldn’t be surprised if we saw some sort of breakthrough.

Other than a few Eurozone nations releasing inflation data, the main news comes from the US today. The weekly jobless claims number will be released this afternoon along with The US producer price index and the calculation of crude oil inventories held in the US. After OPEC reduced its forecast for oil consumption, it’ll be interesting to see how long is the reduction is in the US stockpile. That will have an impact on the US dollar.

And it is hard to believe that William Shatner has boldly gone where a lot of younger people have been before. He got into space for all 3 minutes and on him but goodness only knows how much fuel that rocket uses and how much cash was spent to get him there, but I am with Prince William in thinking the money could be better spent back down here on earth.

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