Forex snapshot

The euro awaits the Federal Reserve meeting tonight, while the Bank of England minutes drive sterling lower.

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Euro awaits FOMC meeting

There is little movement in the euro versus the US dollar today, as it is trading at $1.3560 a touch higher on the trading session. The focus now shifts to the Federal Open Market Committee meeting tonight at 7pm (London time).

Alastair McCaig stated that the standoff between Russia and Ukraine is still bubbling away in the background, but so far there have been no major developments either way.

The consensus for tonight’s meeting is for tapering of $10 billion, and if the Fed taper by $15 billion or more it could drive the euro below $1.35.

Sterling slips from $1.7

The pound quickly dropped from $1.7 after the BoE minutes revealed there was no change in the voting breakdown over interest rates and stimulus package. It briefly rallied above the $1.7 mark in the run up to the BoE minutes but quickly gave up its gains.

None of the members of the Monetary Policy Committee voted in favour of increasing interest rates or changing the size of the bond-buying programme. The BoE stated there is a low probability of an interest rate increase this year, and that increasing interest rates too soon could hamper the UK economic recovery.

Today’s statement slightly contradicts the Mansion House update where Mr Carney warned that interest rates could rise sooner than initially thought. Then again, if he didn’t give with one hand and take with another he wouldn’t be a central banker.

If the pound holds above $1.6920 it will be in a good position to target $1.7011. A taper of more than $10 billion tonight could see sterling move towards $1.6830.

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