Federal Reserve in focus

The Bank of England minutes and the Federal Reserve meeting will ensure an interesting trading session, while Greece still hangs over the market.

Federal Reserve
Source: Bloomberg

Sterling awaits BoE minutes

The pound is still pushing higher against the dollar, and today’s trading session will be see increased volatility as the BoE will release its minutes at 9.30am (London time) while the Fed announcement is due at 7pm (London time).

The market is expecting no change to the voting breakdown for both the interest rate decision and the size of the bond buying scheme, and we expect to see 0-0-9 across both. The UK has rebounded from deflation, and that that has lifted the weight off of GBP/USD, but the US is still leading the interest rate race.

The currency pair has been in an upward trend since mid-April, and the crossing over of the 50-day moving average over 100- and 200-DMA adds to the bullish sentiment.

The target is $1.58, and any pullbacks will find support in at $1.5545.

Euro still ignoring Greece

EUR/USD is still shrugging off the problems in Greece unlike the equity markets, and there seems to be an attitude where it would be beneficial to the single currency if Greece was to leave the currency union. We are still nowhere near an agreement between Athens and its creditors, and it appears traders are only interested in a positive news headline from the discussions.  

The Fed is expected to keep rates to hold tonight, but the focus will be on the language and dealers will try and determine when interest rates will start to rise in the US. Some traders are penciling in September for a rate rise, while others are looking to 2016. The Fed has been deliberately vague over when it will move away from ultra-low rates, and the market is anticipating much of the same tonight.

EUR/USD has been moving higher since March, but the high in June failed to take out the high of May, and there is a lot of consolidation in the $1.12-$1.13 area. The bias is still to the upside, with $1.14 as the target. A drop below $1.12 will find support at $1.10.

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