The US dollar is posting gains across the board. It has risen above JPY103 to its best level since early April. The euro has been pushed through the $1.33 and is at its lowest level since last September. The greenback is also edging higher against the dollar-bloc and most emerging market currencies.
Sterling is the main exception. It also had been under pressure, slipping to $1.6600, but two dissents in favor an immediate rate hike at this month's MPC meeting sent sterling quickly higher (~$1.6680), before sellers re-emerged. The dissents came from the MPC's external members Weale and McCafferty. There had been some speculation of 1-2 dissents, though we were skeptical.
UK interest rates rose a few basis points across the curve, and this lent sterling support. However, data out since the MPC meeting indicates, coupled with the tone of the minutes, ensures Weale and McCafferty stay in the
By Dean Popplewell
Currently, the central banker remains at the "core" for most of the forex moves. Governor Stevens at the RBA is trying hard to jawbone his own currency, the Aussie dollar, lower. The "chameleon" Governor Carney at the BoE seems to be confusing investors with some hawkish weekend copy, combined with dovish comments delivered last week, is complicating the pound's direction this week. Thrown into the mix is an MPC dissenter or two, and if nothing else, policy makers are certainly providing investors with price movement opportunities.
Even stateside, the investor is looking to the policy maker for guidance. The FOMC will release the minutes from its last meeting later this afternoon. Expect the market to downplay the event; instead dealers prefer to look to the annual symposium on monetary policy in Jackson Hole this Friday for market direction. The FOMC minutes will certainly indicate what happened a
After gapping higher yesterday, sterling was sent sharply lower today by the lower than expected inflation figures. Just last week, the BOE had indicated that the headline CPI likely rose at a 1.9% year-over-year rate in July. Instead, it was reported a 1.6% rise earlier today.
This sent UK rates lower and dragged sterling down with them. The implied yield of the March short-sterling futures contract fell 4 bp, as did the 10-year yield. Sterling itself filled the downside gap and kept going. It fell to about $1.6635, a level not seen since early April.
It appears the timing of the summer sales may impact measured inflation. Clothing and footwear prices, which had risen in June, fell off again in July. Yet, factory prices were also soft, with PPI input and output prices coming in lower than expected. On top of this, the decline in oil prices also should weigh