- Australian Dollar dealt a blow
- The calm before the storm
- Federal Reserve interest rate decision in the spotlight
By Alastair Sweetman
Australian Dollar dealt a blow
Overnight, the Australian Reserve Bank Governor, Philip Lowe, dampened demand for the Australian Dollar, saying that interest rate rises were still some way off. Recent lower growth in output had been counterbalanced by an increase in jobs - but growth in wages wasn't strong enough to merit an interest rate hike in the near term.
The calm before the storm
This morning’s UK Inflation data for May remained at year-long lows, the same year-on-year growth rate of 2.4% as we saw in April – and as expected. However, consumers are feeling the squeeze through rising energy prices. Petrol has hit three and a half year highs, thanks to the rising price of crude oil.
After the poor UK manufacturing data at the start of the week, the Pound still looks vulnerable to further weakness - tomorrow morning’s retail sales will be watched keenly. Also, today's vote in Parliament on the House of Lords amendments to the Brexit withdrawal bill could see the Pound snap up or down depending on the outcome. The fact remains that trading ranges are very narrow, there's barely any volatility in currency pairs as global political and economic events play out.
Federal Reserve interest rate decision in the spotlight
The currency markets are awaiting tonight’s Federal Reserve Open Market Committee (FOMC) interest rate decision. A 0.25% increase is already fully priced in but the vote split and accompanying statement will give clues as to whether the Federal Reserve thinks there is likely to be one or two more interest rate hikes this year. A hawkish statement will see the US Dollar strengthening, but a more "wait and see" commentary could see Sterling push back over 1.34 and other currencies jump against the USD. As is often the case, when currency pairs are flatlining and there's barely any movement from day to day, for now, it's the calm before the storm.