FOMC minutes fail to clarify stance

A stable start to the day for both EUR/USD and GBP/USD merely hides the indecision surrounding interest rate decisions.

Alastair McCaig

2015-04-09T09:11:58+0100

Source: Bloomberg

Euro traders await Greek debt deadline

Once again Greece is the focus of the eurozone as expectations are high that it will be able to meet its debt repayments today. Yesterday saw the Greek government raise €1.14 billion from the sale of short-dated sovereign debt, and this should be more than enough to ensure it is able to meet its €460 million repayment to the International Monetary Fund.

Cynics would of course point out that if you were to default in repaying debt, the last resort should be defaulting to the IMF. Suffice to say this is another deadline that Syriza has managed to avoid at the last minute.

A week ago EUR/USD flirted with breaking above the $1.100 level, and we thought that it was merely a better opportunity to sell into. This current squeeze lower looks far from being the complete move and hanging onto the short positions could still offer further rewards.

Spot FX EUR/USD chart

FOMC comments driving GBP/USD price action

Today the Bank of England will announce its latest interest rate decision along with the asset purchasing scheme. Considering this is the last announcement that we will see before a general election it is highly unlikely we will see any change.

At present the IG binaries on the election are pointing towards a Labour minority government as the most likely outcome from these elections. Considering the destabilising effect such a weak base for government would create and the high chance of a further election within the next couple of years, it is hard to believe that GBP/USD has fully factored in the consequences of this.

The global macro issues surrounding the Federal Open Market Committee’s inability to reach a consensus still looks to be driving the price action.

Will the US raise interest rates in June, July or later? Whatever the decision currency markets are still factoring in a rise and the UK remains some way off even having that discussion let alone agreeing a date for a move. We would remain in our short positions and only a sustained break above the $1.500 level would trigger a re-think.