Forex snapshot

EUR/USD traders remain pensive ahead of tonight’s Federal Open Market Committee meeting minutes, while GBP/USD traders try to digest the change in Monetary Policy Committee voting.

GBP/USD currency
Source: Bloomberg

GBP/USD looks for support

For the first time since July 2011, the MPC has voted for a change to the current interest rate. This has added to the murky picture that has been painted with the contrasting comments from Bank of England governor Mark Carney over the last couple of weeks, as timelines for change have grown and shrunk on an almost daily basis.

Markets reacted instantly to this release by adding 50 pips to GBP/USD, but subsequently over the next half-hour eroded almost half of those gains.

The balance for change remains delicate and with two members having voted for a raise of interest rates, the chance of it happening before the end of the year is still a possibility – which would have serious consequences to the spending power of the UK population.

In the short term this should halt GBP/USD’s fall but may not be enough to change the trend without the co-operation of some supportive economic data.

Euro below $1.33

The euro has fallen below the $1.33 mark as Germany produces poor economic numbers yet again.

The euro is trading at $1.3299, down 0.15% on the day after Germany revealed a 0.1% decline in PPI in July. Analysts were expecting no change on the month. This morning’s update is the latest in a string of weak economic announcements from the powerhouse of the eurozone. Since Germany is the most influential country in the currency union, traders are beginning to think that the European Central Bank will need to ease its monetary policy again.

On a positive note, relations between Ukraine and Russia seem to be improving which could lead to the sanctions being lifted. However, until that happens we are unlikely to see any major correction in the euro. The Federal Reserve will release the minutes of its latest meeting at 7pm (London time). If the Fed reiterates its commitment to ultra-low rates for an extended period after quantitative easing ends, the euro could target $1.3380 in the short-term.

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