Sterling was able to end its run of losses on Tuesday as it made subtle gains against both the Euro and the U.S. Dollar. While the Greenback saw losses against both the Pound and the Euro on Tuesday, today’s FOMC Economic Projections will likely determine the near-term trajectory of the Dollar. Investors are keen to see if the Federal Reserve will intervene to cap the recent surge in long-term rates, or hint at tapering policy measures earlier than expected as a response to rising inflation. However, most believe that the Fed will reiterate their claim that they are still a “long way away” from achieving its mandated inflation and employment goals – thus things will likely stay the same. When questioned on the rise of longer-term rates in an interview Jerome Powell said that “it was something that was notable and caught my attention” but failed to comment on any future action from the central bank. Instead, the Chairman said the Fed will be patient in assessing when the right time will be to eventually begin tapering monetary policy measures.
After falling into the 1.38’s on Monday Cable was unable to move out of this range in the Tuesday session – opening at 1.3859 and closing at 1.3891. Depending on the outcome of tonight’s FOMC Economic Projections, we could see heightened volatility in the pair.
GBPEUR was also able to make modest gains yesterday and still remains strong – opening at 1.1618 and closing at 1.1679.
EURUSD slipped from the 1.19 handle yesterday, closing Tuesday in the 1.18’s. The pair started the day at 1.1928 but was unable to hold on to that position, finally closing at 1.1894.
On the data front, it’s a busy calendar today, starting of with Eurozone Core Inflation at 10:00. Then in the afternoon we have a plethora of releases from across the pond. From 12:30 we have U.S. Building Permits MoM, Housing Starts MoM, EIA Crushing Crude Oil Stocks Change, and then the all important FOMC Economic Projections and Fed Interest Rate Decision.
