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September 2015

Daily Currency Insight

Published: Monday 14 September 2015

Comments from Bank of England member Weale over the weekend have helped keep Sterling supported this morning. Martin Weale said that rates may have to rise relatively soon in order to keep inflation on target over the medium term. Higher wages and better employment prospects should push inflation above the 2% target in 2 to 3 years time and policy should be set to combat that rather than the current rate of inflation. He noted that cheaper oil was driving the present low inflation landscape and that that would not last forever. I don't think that he actually said anything that was new however this is another signal that policy makers are looking for reasons to pull the trigger and as such all data releases will be closely watched. Tomorrow's inflation data becomes even more important particularly if it surprises to the upside. Unemployment data on Wednesday will also have the potential to move the market as the unemployment is expected to fall further. This could be a pivotal week for the fortunes of the Pound.
The focus this week will be on the Us dollar as traders lighten positions ahead of the interest rate decision on Thursday. Analysts are evenly split as to whether or not the Fed will move this month as the recent data from the US has been mixed and also event in China may have tempered expectations for global growth. In my opinion it's likely that the fed will leave rates on hold while leaving the door open for a move later this year. I don't think that they will want to take any risks and would prefer to wait to ensure that growth is entrenched before making the move. In this environment there may be opportunities to purchase dollars at slightly better levels so limit orders will be invaluable.
Today is very light on data with nothing of note due for release. I would expect Sterling to take its cue from Tomorrows inflation and Wednesdays unemployment data. That being said I doubt that traders will put on large positions ahead of the FOMC on Thursday so current ranges may be respected ahead of the meeting.