FX Market Update: Dollar Steady as Focus Turns to FOMC Minutes.
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USD – Remains range-bound, with markets awaiting fresh direction from tomorrow’s FOMC minutes. Stable US data has kept Fed expectations largely unchanged, while comments from Fed Governor Waller have brought renewed focus to the future of forward guidance.
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EUR – Is in a neutral position, with limited domestic catalysts and direction likely to come from US developments. Better-than-expected German industrial production has provided modest support, but momentum remains subdued.
- GBP – Is showing relative strength, supported by improving sentiment and a quieter domestic backdrop. Sterling has pushed to fresh highs against both the euro and the dollar, though today’s focus turns to comments from Bank of England Governor Bailey.
USD:
The dollar has been trading within recent ranges over the past few sessions, with little conviction to break higher or lower. Yesterday’s ISM Services PMI came in as expected at 54.0, reinforcing the view that the Federal Reserve remains on course to keep policy unchanged for now. Markets were also paying attention to comments from Fed Governor Christopher Waller, who expressed support for the continued use of forward guidance—a notable contrast to the approach favoured by incoming Fed Chair Kevin Warsh. Attention now turns to tomorrow’s release of the FOMC meeting minutes, which should provide greater insight into the Fed’s decision to hold rates steady. Before then, today’s ADP employment data will offer an additional read on labour market conditions.
EUR:
The euro is lacking a clear catalyst of its own and is likely to take direction from US developments over the remainder of the week. While attention will be on speeches from ECB policymakers Joachim Nagel Kocher and Fabio Panetta, the main market driver is expected to remain the US outlook. Overnight, German industrial production surprised to the upside, rising 0.9% month-on-month, providing some encouragement for the euro. However, without a broader shift in sentiment or policy expectations, the single currency is likely to remain within recent ranges.
GBP:
Sterling has continued to strengthen this week despite the absence of any major domestic data releases. The pound has climbed to its highest level against the euro in a year and its strongest level against the US dollar in almost three weeks. The move appears to be driven by a combination of easing expectations for further rate hikes elsewhere and a smooth political leadership transition in the UK, helping improve market confidence as headline risks fade. There are no major UK data releases today, with the focus instead turning to comments from Bank of England Governor Andrew Bailey as he discusses the Financial Stability Report.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 10:30am BST - GBP | BOE's Financial Stability Report |