After months of hand wringing and much debate within the markets , Federal Reserve officials left interest rates unchanged yesterday. They decided to delay an increase in rates amid stubbornly low inflation, an uncertain outlook for global growth and recent financial market turmoil. They were much more dovish than expected and Thursday's inaction signified that the committee is uncertain about how global growth events such as the slowdown in China will translate into their outlook for US growth. Despite the dovish commentary and lowering of growth forecasts the majority of the committee still see a case for raising rates in 2016 so there may be limited scope for an extended dollar sell off. For now the trend is higher as investors reassess the chances of a move however I think it is only a matter of time before rate hikes are back on the agenda.
The only data of note due for release today is consumer price inflation from Canada. CPI is likely to slow to around 1.2% on the year and there is a growing expectation that the Bank of Canada will cut rates again in October. The Central bank last reduced rates in July as low oil prices have hammered Canada's energy sector. Lower inflation would increase the chances of a rate cut so this afternoon's data is crucial.
Aside from the Canadian data there is very little for anyone to get their teeth into today therefore the current trends will prevail for the time being. Over the weekend there is the small matter of a Greek election with the result looking too close to call. If there is no clear winner leading to protracted coalition talks and a delay in implementing austerity measures this could begin to weigh on the Euro. With little else to focus on the prospect of renewed tensions in Europe will be back on the agenda.