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October 2016

Concerns about a damaging "hard Brexit"

Published: Wednesday 12 October 2016

  • ‚ÄčConcerns about a damaging "hard Brexit"
  • Dollar remains firm against the Euro
  • FED meeting minutes today’s focus
The Dollar remained firm against the Euro but pared back some gains against other major currencies as focus turns to Federal Reserve minutes later on today. Following on from the previous meeting on September 21st, three of ten voters dissent the decision to keep Federal Funds rate at 0.25-0.50%. The vote showed that hawks in Federal Open Market Committee (FOMC) could be starting to gain momentum and markets will be looking for further evidence of that.  The release of the minutes should give markets a sense on how firm the Federal Open Market Committee (FOMC) is on raising interest rate in December. Currently, the Federal Reserve (FED) fund futures are pricing in nearly 75% chance of a December move.

In the UK, newly appointed Bank of England (BoE) MPC member Michael Saunders said that there will be "an inflationary effect coming through in the next two-to-three years from the drop in the Pound". Import prices could "rise perhaps 12-13 percent". Concerns about a damaging "hard Brexit" have kept Sterling under pressure however UK Prime Minister Theresa May has accepted that Parliament should be allowed to vote on her plan for taking Britain out of the EU. She made it clear that there should be no attempt to block Brexit but with more parliamentary involvement, we may see a toning down of the more extreme hard Brexit rhetoric. The Pound jumped 1.5% although it is yet to be confirmed if this is simply a relief rally or a change in sentiment.

On the data front, Australia Westpac Consumer Sentiment rose 1.1% in October. Japan Machine Orders dropped -2.2% month-on-month in August. The Eurozone will release Industrial Production while Swiss will release ZEW expectation in European session. The main focus today will be later this afternoon when the Fed release the Federal Open Market Committee (FOMC) minutes at 19:00 GMT.

Clever kids

A police officer found a perfect hiding place for watching for speeding motorists.

One day, the officer was amazed when everyone was under the speed limit, so he investigated and found the problem.

A 10 year old boy was standing on the side of the road with a huge hand painted sign which said “Radar Trap Ahead.”

A little more investigative work led the officer to the boy’s accomplice: another boy about 100 yards beyond the radar trap with a sign reading “TIPS” and a bucket at his feet full of change.


Today's Major Economic Releases 

Market BST Data/Event Previous Expected
EUR 10:00 EU: Industrial production month-on-month  -1.1% 1.6%
GBP 10:00 MPC member Cunliffe speaks    
USD 13:00 FOMC member Dudley speaks    
USD 14:40 FOMC member George speaks    
USD 15:00 US: JOLTS job openings 5.87m 5.79m
USD 19:00 FOMC meeting minutes    

Daily Currency Analysis by Charlie Horsley

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