Market Analysis by Junaid Wilson
– Its coming up to the end of the Year and investors who have been short euros, long dollars for most of the year may start to take profits. Since we have had a 5% move in the EUR to the upside over the period of a week its very unlikely that we will see the dollar make new highs going into the new year, whether the FED raises rates or not.
Consumer spending drives the US economy and over this year spending levels have been low. Looking to the retail sales, weak report would hurt the USD and encourage more investors to bail out of the dollar pre-FOMC. The only person that could save the dollar is Janet Yellen and we won’t hear from her until next week.
Yesterday Investors sold the GBP after the Bank of England’s monetary policy announcement but GBP/USD ended the day off its lows. While the decision to leave interest rates unchanged was the same as the previous month with 8 members voting for and 1 against the move, the central bank expressed concerns about wage growth the minutes clearly show that elsewhere on the MPC, there is no appetite for any early tightening with the economic scenario at home and abroad not regarded as significantly different from last month.
The UK economy is still doing OK, especially in comparison with most of the rest of Europe, but inflation pressures remain light. Moreover, with commodity prices in general and oil in particular still heading down, upcoming CPI data should further reduce any pressure for a tightening. Monetary policy should stay on hold well into 2016
The New Zealand dollar headed higher post RBNZ. While the gains were small, they reflect the market’s assessment of the central bank’s rate announcement. The Reserve Bank cut interest rates 4 times this year and they could lower them further if the economy weakens. But for now they feel that they’ve done enough.