Last nights Fed minutes didn’t tell us anything that we didn’t already know, given the removal of “patience” from the guidance language, and the differences of opinion articulated by several members since that meeting.
The minutes did show us that members were split three ways
between a potential lift off in June, and a lift off in September with at least two favouring a delay until 2016, which suggests that the consensus needed for a change in policy still remains some way off.
Given that these minutes pre dated the most recent economic data
we can probably presume given recent comments that those who favoured a June move could well be revising that assessment, indeed Atlanta Fed President Dennis Lockhart stated as much in comments earlier this week, when he talked about a possible July or September window. US investors appear to be drawing that conclusion already, given the rebound in stock markets in the wake of last night’s minutes.
It should also not be forgotten that the Fed downgraded its inflation and growth forecasts
at its last meeting and the economic data seen since then hasn’t exactly improved much, which suggests any upgrade would require a significant improvement over the next couple of months.
These splits on the FOMC look set to help European markets open slightly higher
this morning after a disappointing session yesterday with the focus once again shifting back to Greece and the scheduled repayment of €460m due to be repaid to the IMF today
, which looks to have been made possible by yesterday’s successful €1.14bn sale of 6 month treasury bills at a rather hefty 2.97%, though overseas investors were notable by their absence.
EU creditors look no nearer arriving at an agreement with Greek officials
than they were when the bailout agreement was extended all the way back in February with the likelihood that the current saga looks likely to limp on into May, particularly if domestic buyers continue to mop up the various T-bill rollovers in the next couple of weeks.
Yesterday’s talks between Greece and the Eurogroup (EWG)
ended with the EWG issuing the Greeks with an ultimatum to present acceptable proposals for fiscal, pension and labour market reform in the next six days, whatever that means.
Given that we’ve been here so many times before, ultimatums generally only work when there is a threat of a significant sanction at the end of the deadline
, and short of throwing Greece out of the euro it would seem that any sanction is likely to be limited, particularly if Greece continues to muddle through.
Also on the agenda is the last Bank of England rate meeting before next month’s UK election
with no surprises expected despite this week’s positive economic data.
Simply put, the Bank of England would probably not act even if it wanted to, as it could potentially lay itself open to political criticism so close to an election.
UK trade data for February is expected to slip back
after the surprisingly good numbers seen in January with the deficit expected to widen from -£616m to -£1.5bn in February.
As such no change to monetary policy is expected
to be forthcoming, probably the only time in the modern era the Bank of England has never had to move on interest rates through the entire term of a UK parliament’s 5 year term.
Back in the US the latest weekly jobless claims
are expected to jump back from last week’s surprise drop to 268k to 283k.
– Fridays rally back to the 1.1050 area marks out this area as a significant barrier to further gains, though it feels like we are currently range trading. Last week’s low at 1.0710 is the next support level as the euro has subsequently drifted back.
– the pound continues to find the air thin anywhere near the 1.5000 area which suggests we could well see a return to the lows last week at 1.4738, which keeps the risk of a move towards the lows at 1.4630 on the table. We need to push back above 1.5000 to argue for a return towards the 1.5200 level.
– the euro is currently encountering a barrier just below the 0.7400 area and while below here the risk remains for a return towards the 0.7220 level and the lows last week. Intraday resistance can be found at the 0.7340 level.
– this week’s rebound from the 118.70 Friday lows needs to push above the highs last week at 120.40, as well as resistance at the 120.70 level to argue for a return to the previous highs at 122.00
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