Alpesh Patel's NEWSLETTERPRO - What will the central banks’ minutes reveal about the global economies?

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© Alpesh Patel

Mixed performances from the major currencies yesterday in a day with a number of important events. Market participants were back in force after the slow start of the week on Monday and we saw volatility picking up after the various releases.

The Euro was higher reaching 1.3770 even though the ZEW Survey came in less optimistic than expected. The European currency managed to hold on to previous gains when the survey was released and it was later lifted by the weak demand for Dollars when the Housing Index released in the afternoon showed another contraction in the sector.

The Pound on the other hand was hit by the miss in inflation figures that printed slightly lower than previously eyed and on the back of the profit taking action on Friday and Monday the British currency fell towards 1.6650. However, the Pound will have the chance to gain back the lost ground today as the Unemployment Rate is scheduled for release along with the minutes from the previous Bank of England meeting.

The Unemployment Rate is expected to remain stable at 7.1% and with Average Weekly Earnings projected to improve for another month we feel that the Pound could once again reach for 1.6800 or even above that. The minutes from the last BoE meeting will offer important hints on how optimistic British policymakers are over the domestic economy and their comment have the potential to re-ignite the recent uptrend.

The Dollar was in the backseat as there were no important releases from the US this week and the NAHB Housing Index released yesterday showed a contraction in the housing market. We will have the chance to learn more about the housing sector today with the Housing Permits and Building Starts numbers scheduled for release but the main focus is on the release of the minutes from the last Fed meeting.

The Dollar has been under pressure during the first month and a half of 2014 since the Fed decided to continue on schedule with their tapering agenda and there are voices that suggest that maybe the economy is not that strong to handle consecutive and uninterrupted $10bn cuts in the added stimulus. Rumors in the trading rooms make word for the possibility that the Fed could put the tapering schedule on hold for a month and today’s release of the Fed minutes will show us how confident the committee members are on their agenda.

Finally, the FTSE 100 was on the rise for a second day and the UK index reached the 6,800 points level. The next resistance is at the yearly high of 6,870 and if today’s Unemployment data print stable then we could be in for a new high in the coming sessions.

British unemployment and central banks’ minutes

The Economic Calendar today offers a number of important events. As we mentioned above, the UK Unemployment Rate and data are on focus this morning and with the Pound having retreated from its recent highs there’s room for new swings higher if the data print positive. Expectations are that the Unemployment Rate will remain stable at 7.1% but we could see an even better result bringing the rate down to 7%.

The other main theme of the day are the releases of the meeting minutes from both the Bank of England and the Fed. Investors will look into these minutes with increased interest and the key word will be ‘optimism’. Optimistic comments from the Bank of England will continue to propel the Pound higher while the confidence of Fed’s policymakers in their tapering agenda could provide the declining Dollar with some much needed support.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

9.30

GBP

ILO Unemployment Rate

Medium

7.1%

7.1%

9.30

GBP

Bank of England minutes

Medium

13.30

USD

Housing Starts

Medium

-4.9%

-9.8%

19.00

USD

Fed releases FOMC meeting’s minutes

Medium

 

 

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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