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Currency Outlook: Fed meeting and Scotland says "No"

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Scotland's "No" vote should be good for the Pound
Alberto M.


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The “No” of Scotland to its independence on Thursday and the Federal Open Market Committee meeting last Wednesday were the key events with regards of last week currencies market.

The “No” of Scotland was a great relief for the pound, which finished the week recovering part of the lost ground prior to the vote. The short term future for GBP is promising, although it will be slightly weaker than the USD.

The Fed meeting had the expected outcome: the tampering plan is finishing in October and no rates raises yet. The good shape that USA economy presented the previous months was pointing towards an end for the need of the tampering plan. In fact, although it may take a bit longer, a rise on interest rates is probable from the Fed in the following months. Janet Yellen hinted that after the first hike, the subsequent ones may occur even faster.

This week major events are Mario Draghi’s declaration, US macro-economic data disclosures and, in Asia, the HSBC Flash manufacturing PMI.

Since the measures adopted by the ECB are not correcting the problems with the stalled recovery of Euro zone, Mario Draghi may have to take further measures. The situation with the Euro zone is becoming tenser lately, and today Mario Draghi speaks in Brussels to explain the future monetary policies the ECB is going to adopt.

USD Outlook:

If last week’s most important event for the USD was the Federal Open Market Committee, this week follows with important macroeconomic data releases: US New Home Sales, US Durable Goods Orders and US Unemployment Claims and Final US GDP.

The FOMC meeting revealed that the Fed will end the tapering program in October, as the good economic results in the previous weeks suggested to do. In addition, a rate rise is becoming more probable, and the Fed hinted that once rates are raised, subsequent hikes could take place more quickly than expected.

The estimates on US New Home Sales, US Durable Goods Orders and US Unemployment Claims and Final US GDP are extremely confident on the growth of USA, and this will impact the health of the USD, which will have a good week.

EUR Outlook:

Today starts another bad week for the Euro. The first installment of the targeted loans (TLTROs) had a poor reception. Mario Draghi talks today to explain the ABS plan to the European Parliament’s Economic and Monetary Committee. His words will make an impact in the markets, especially if he starts to speak about Quantitative Easing.

In addition, this week the Flash PMIs on Tuesday on France, Germany and the whole Euro zone are expected to show the contraction in manufacturing volume in France and a weak growth in the Euro zone.

On Wednesday, the German Ifo and the Belgian NBB Business Climates will show the business confidence on Europe. Probably, these data reveal a negative sentiment on the European economic situation.

GBP Outlook:

The national sovereignty debate in Scotland has ended after last Thursday “No”, at least for the near future. Compared to the previous week, the pound will be less volatile in the forex space. The end result of the vote and the good economic status of United Kingdom suggest that this will be a good week for GBP.

JPY Outlook:

On Thursday the National Consumer Price Index and the Tokyo Consumer Price Index of last month will be released. These economic statistics are fundamental to measure the economic status of Japan, as they are the primary gauge of consumer inflation. Although the inflation level have improved in recent months, the overall expectation is that the Yen is still in a weak trend, even more with respect to USD, and that this will be a bad week for JPY.

"Currency Outlook: Fed meeting and Scotland says "No"" User Comments

Bitter Scot


"it was rigged"

Posted: September 24th, 2014
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