Pound Euro Rate Steady Ahead Of BoE And ECB Announcements ? Fed FOMC Minutes Could Send GBP USD Higher

Published: Thursday, 4 October 2012 09:00 BST - Written by Frank Davies

STORY LINK Pound Euro Rate Steady Ahead Of BoE And ECB Announcements ? Fed FOMC Minutes Could Send GBP USD Higher

The overnight Asian session provided further evidence that Australia’s economy is beginning to feel the effects of the global slowdown. August’s Retail Sales figure showed a month-on-month uptick of only 0.2%, following July’s dire reading of -0.8%. Analysts had been anticipating a monthly increase of 0.4%. The poor shop sales number was exacerbated by worryingly weak Buildings Approvals data, also released last night, which showed at an annualised -15.4%. The figure is a key leading indicator of future activity levels in the construction sector, so last night’s number could be a portent of difficult times ahead for the Australian economy. The dual set of disappointing Aussie data sets followed on from startlingly poor trade figures 24hrs earlier, which revealed a mammoth monthly trade gap of AU$2.027bn for the Antipodean state – a terrible reading for a country which depends upon the export of its raw materials.

The GBP AUD exchange rate stands at 1.5745 currently, but there may be further upside to come for the pair in the near-term, given the tone of this week’s Australian data and the Reserve Bank of Australia’s surprise decision to trim interest rates, which was announced on Tuesday morning.

Today’s agenda in the currency markets is likely to be dominated by decisions and commentaries from three of the world’s leading central banks. The Bank of England is expected to announce that it is set to maintain its current monetary policy stance at 1200hrs BST today. Anything other than a ‘hold’ decision from the BoE would be likely to see the Pound plummet across the board. The ECB’s monthly policy announcement follows 45 minutes later; Europe’s central bank is also expected to keep rates on hold at 0.75%, following last month’s announcement of an open-ended bond purchase scheme from ECB President Mario Draghi.

Finally, the minutes of last month’s Federal Reserve FOMC meeting are due for release at 1900hrs BST. If these memos reveal that the Fed’s policy committee discussed allocating more than the US$40bn per month which they decided on for QE3 at their last meeting, then the Greenback may come under sustained selling pressure ahead of the weekend shut-down.

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