There weren't any surprises from last nights Fed minutes though we appeared to get a firm date for the end of the asset purchase program
, with a final reduction of $15bn at the October meeting, assuming the economy stayed on its current course of recovery.
The main takeaway was that there remained a wide range of views as to the amount of slack
still in the economy and that there appeared to be no set timeline for a tightening of policy after the program stops.
It would appear that the FOMC is keen to avoid a repeat of the incident earlier this year
when in an unguarded moment, Janet Yellen suggested a six month period
before some form of tightening could well begin.
This, combined with a slightly firmer bias as a result of some positive Alcoa earnings, helped US markets rebound off their intraweek lows and finish higher, while 2 year yields slipped back sharply, after hitting their highest levels this year, earlier in the day.
It would appear that the lack of concern expressed about a possible inflation threat is currently being outweighed by tepid wage growth and the number of part time workers and depressed participation rate.
Today's weekly jobless claims numbers are expected to remain around the 315k level
Back in Europe, against a backdrop of a slightly higher open, attention returns to the UK economy
in the wake of those disappointing manufacturing and industrial production numbers seen earlier this week, with the latest trade balance numbers for May, as well as the latest Bank of England rate decision.
The May trade gap is expected to narrow to -£8.7bn from -£9.6bn
, while there aren't expected to be any surprises from the latest Bank of England rate decision.
It is just over a year since new governor Mark Carney walked through the doors of the Bank of England,
and in the twelve months since he started, the UK economy has undergone an impressive growth spurt. In the meetings since then we've seen what can only be described as some fairly fluid forward guidance, and I can't imagine that the next twelve months will be any different.
The recent mixed messages over the timing of a rate rise are hopefully not likely to be a recurring theme
, with the narrative likely to focus on the gap between wages and inflation.
We aren't expecting any change in policy today
despite the presence of two new voting members, with the departure of Spencer Dale as chief economist being replaced by Andrew Haldane, while US economist Kristin Forbes also joins the MPC as well, replacing Ben Broadbent as an external member, who in turn replaces Deputy Governor Charles Bean.
While the most recent minutes appear to suggest that the decision to leave rates unchanged last month was becoming more balanced there doesn't appear to be any suggestion, new voting members aside, that there will be any change to the current stance this month
, though the minutes in a few weeks’ time could well make for interesting reading as to the policy leanings of the two new members.
– still in the overall uptrend since the 2012 lows. The broader range remains intact and while we hold above the 1.3500 level, the risk of a move back towards 1.3700 remains more likely. The key support remains at 1.3485 where we have trend line support from the 2012 lows.
– while 1.7180 continues to cap the topside, the risk for further gains towards 1.7330 remains, while above 1.7040. 1.7330 is the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Only a move below 1.6910 support delays the scenario above.
– the current pullback continues to find selling interest around the 0.7960 area, which had acted as support on the way down. The 0.7880 remains the next target while below the 0.7960 area, with a move through here potentially targeting the 0.8035 area. The pressure remains on the downside while we remain below trend line resistance from the March highs now sitting just below the 0.8055 level.
– slipping below 101.80 keeps the broader range intact as we continue to play the range between 101.20 and the range highs just below 103.00.
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