News Column

Forex: Central Bank Meeting Minutes May Hurt Pound, Boost US Dollar

May 20, 2014

Ilya Spivak

Talking Points:



  • BOE May Meeting Minutes May Disappoint Hawks, Weighing on the Pound
  • US Dollar May Get Another Push Higher from Pro-"Taper" FOMC Minutes
  • Yen Gains After BOJ Rate Decision, Aussie and Kiwi Fall on Risk Aversion



    The release of minutes from this month's Bank of England monetary policy meeting headlines the economic calendar in European trading hours. As we discussed in detail last week in anticipation of the central bank's quarterly Inflation Report, the thinking on the rate-setting MPC committee may be far less hawkish than the markets are primed to hear. With that in mind, rhetoric pushing back against near-term interest rate hike expectations in today's release may weigh on the British Pound and we remain short GBPJPY.



    Later in the day, the spotlight turns to what may prove to be the week's most impactful bit of scheduled event risk: minutes from April's Federal Reserve meeting. Traders will be keen to gauge policymakers' confidence in QE reduction continuity amid what looks like a re-acceleration of US growth. Recognition of this transition in its infancy would go a long way toward brandishing the Fed's ability to read the business cycle, bolstering the central bank's credibility and scattering doubts about the likelihood of an end to asset purchases by autumn.



    Unencumbered speculation about the culmination of QE and the commencement of interest rate hikes thereafter bodes well for the US Dollar against its leading counterparts. In fact, technical positioning hints a trend change is afoot. Fears of ending stimulus may likewise trigger broader-based risk aversion across the financial markets, a scenario that bodes ill for higher-yielding and cycle-sensitive currencies. We are still holding short AUDUSD and have now entered long USDCAD.



    The Japanese Yen narrowly outperformed in overnight trade after the Bank of Japan opted to keep monetary policy unchanged as expected, disappointing bets on an expansion of stimulus. The Australian and New Zealand Dollars came under pressure as Asian stocks edged downward, undermining demand for the sentiment-linked currencies. Japanese shares led the way lower among the region's top bourses, with the benchmark Nikkei 225 index down as much as 0.5 percent.









    Asia Session



    GMT

    CCY

    EVENT

    ACT

    EXP

    PREV

    22:45

    NZD

    Net Migration s.a. (APR)

    4080

    -

    3890

    23:50

    JPY

    Merchandise Trade Balance Total () (APR)

    -808.9B

    -646B

    -1446.0B

    23:50

    JPY

    Adj Merchandise Trade Balance () (APR)

    -844.6B

    -633.0B

    -1626.8B

    23:50

    JPY

    Merchandise Trade Exports (YoY) (APR)

    5.1%

    4.8%

    1.8%

    23:50

    JPY

    Merchandise Trade Imports (YoY) (APR)

    3.4%

    0.8%

    18.1%

    0:30

    AUD

    Westpac Consumer Conf Index (MAY)

    92.9

    -

    99.7

    0:30

    AUD

    Westpac Consumer Confidence (MAY)

    -6.8%

    -

    0.3%

    1:00

    AUD

    Skilled Vacancies (MoM) (APR)

    -0.2%

    -

    -0.2%

    1:30

    AUD

    Wage Cost Index (QoQ) (1Q)

    0.7%

    0.7%

    0.7%

    1:30

    AUD

    Wage Cost Index (YoY) (1Q)

    2.6%

    2.6%

    2.6%

    2:41

    JPY

    BOJ 2014 Monetary Base Target ()

    270T

    270T

    270T

    3:00

    NZD

    Credit Card Spending (MoM) (APR)

    -3.2%

    -

    1.5%

    3:00

    NZD

    Credit Card Spending (YoY) (APR)

    3.2%

    -

    7.6%

    5:00

    JPY

    Supermarket Sales (YoY) (APR)

    -

    -

    9.4%

    6:30

    JPY

    BOJ Gov Kuroda Holds Press Conference

    -

    -

    -





    European Session



    GMT

    CCY

    EVENT

    EXP

    PREV

    IMPACT

    7:00

    CHF

    Money Supply M3 (YoY) (APR)

    -

    9.0%

    Low

    8:00

    EUR

    Eurozone Current Account s.a. (E) (MAR)

    -

    21.9B

    Low

    8:00

    EUR

    Eurozone Current Account n.s.a. (E) (MAR)

    -

    13.9B

    Low

    8:30

    GBP

    Bank of England Minutes

    -

    -

    High

    8:30

    GBP

    Retail Sales ex Auto (MoM) (APR)

    0.5%

    0.1%

    Medium

    8:30

    GBP

    Retail Sales ex Auto (YoY) (APR)

    5.2%

    4.2%

    Medium

    8:30

    GBP

    Retail Sales Incl. Auto (MoM) (APR)

    0.4%

    0.1%

    Medium

    8:30

    GBP

    Retail Sales Incl. Auto (YoY) (APR)

    5.1%

    4.2%

    Medium





    Critical Levels



    CCY

    Supp 3

    Supp 2

    Supp 1

    Pivot Point

    Res 1

    Res 2

    Res 3

    EUR/USD

    1.3626

    1.3662

    1.3682

    1.3698

    1.3718

    1.3734

    1.3770

    GBP/USD

    1.6709

    1.6772

    1.6805

    1.6835

    1.6868

    1.6898

    1.6961














  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: DailyFx


    Story Tools






    HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters