Has Carney inspired the FOMC?

<p>The FX markets are in a holding pattern ahead of the FOMC policy meeting this evening and the release of UK MPC minutes from the […]</p>

The FX markets are in a holding pattern ahead of the FOMC policy meeting this evening and the release of UK MPC minutes from the June 5th meeting. Yesterday inflation data showed stark contrasts across the pond, with the UK CPI release coming in at its lowest level since October 2009 and falling 0.3% to 1.5% year on year. US inflation data released some four hours later showed an increase of 0.4%, taking the yearly number to 2.1% as US 10-year yields rallied to a high of 2.79% although this level hasn’t been sustained overnight, falling back to 2.65%.

The markets will be looking for Janet Yellen and the FOMC to add a hawkish tone on the one-year anniversary of the Bernanke ‘taper tantrum’ when markets were unanimous in their thinking of a dovish tone only for the then Fed Chairman to stick with the tapering script. The risks are that we see similar comments to that of BoE Governor Mark Carney at last week’s Mansion House speech where the market needs to bring forward their thinking of the first rate hike expectations. The median on the ‘dot plot’ gap has closed over the past month, supported by stronger data from the US in the form of rising inflation and strong jobs data which are central to the Federal Reserve’s dual mandate policy.

Keep a close eye on events in Iraq as there are reports on Twitter this morning that the main oil refinery in Iraq is under fire as the market prices a ‘no oil’ scenario in Iraq at crude $200 per barrel.

 

EUR/USD

Supports 1.3500-1.3480-1.3410 | Resistance 1.3580-1.3605-1.3630

 

 

USD/JPY

Supports 102.00-101.60-100.75 | Resistance 102.50-102.85-103.05

 

 



GBP/USD

Supports 1.6940-1.6900-1.6885 | Resistance 1.7010-1.7045-1.7100

 

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.