Later today the US Federal Reserve
will present its latest monetary policy statement. This is a key event in the
Forex calendar and one that is always likely to give rise to sharp short-term
volatility, which is why Mandelbrot stands aside on this day.
The statement will be closely
examined by market participants for any hint as to the timing of US interest
rate rises, which have implications for US dollar strength. Clues from the Fed on
this question have been ambiguous, with some indication earlier this year that
we might see a start to a gradual rate rise pattern around now, but this has failed
to materialise. In the meantime the members seem to be almost as much concerned
about events that are external to the US as they are to the domestic situation,
with Greece previously, and now China, up front and centre. Caution seems to
the watchword, but any indication that inflation might be about to take off
will galvanise them into action.
Bank
of England could be out of the blocks first with interest rates
On the other side of the pond, the British
Pound has been consolidating of late against the greenback, and now has the
aspect of a coiled spring, waiting for interest rate news from the Bank of
England (see chart at top).
The UK economic situation has been
quietly improving, with GDP figures the latest to show some strength. Mark
Carney, the governor, and his team, have announced that they will be
streamlining the release of information into the market, and this could have
some bearing on the matter. Or perhaps not. Mr. Carney’s previous attempts at ‘forward
guidance’ did not exactly have the desired effect, mainly because he discovered
that no one, not even central bankers, can foretell the future.
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