Data-heavy day to boost risk sentiment

Lively currency markets are likely to become more volatile as a plethora of economic data is set to be released, giving fresh impetus to both bears and bulls as they chase their own agendas. 

US Federal Reserve building
Source: Bloomberg

Traders will be bombarded with economic data today, the majority of which will be open to interpretation and therefore the inevitable volatility that this brings. First we have the Bank of England statement along with last month’s Monetary Policy Committee voting, which should offer a soft start to the day as both are fully anticipated to remain unchanged.

While this transpires, the streets of Frankfurt have seen protesters dodging water cannons and burning cars outside the European Central Bank’s newly opened headquarters. The unrest in Germany is happening as the latest polls suggest that 59% of Germans would now like to see a Grexit, up from 40% just a couple of weeks ago. The Greek charm offensive is obviously more the latter than the former. 

At 12.30pm (London time) George Osborne will try and pull a few vote-winning rabbits out of his red case as he embarks on what is likely to be the most political budget we have seen in some time. These are the warm-up acts before the US takes centre stage with the FOMC statement. Market watchers around the world will be playing ‘patience’ bingo as currency markets have already factored in a change in phraseology that will point towards an interest rate rise sometime in the third quarter.

With the budget looming the FTSE’s morning session is always likely to be a little quieter as traders tread water waiting for confirmation of which sectors will be most affected.

The usual suspects will be monitored more closely with the likes of drinks, utilities, pension providers and defence stocks all sitting on the edge of their seats. Once again the far greater exposure to the mining and energy sectors has seen the FTSE outperform mainland European equity indices.

Will she or won’t she? The question on everyone’s mind is will we see ‘patience’ omitted from the latest Federal Open Market Committee statement at 6pm tonight. Currency markets have voted with their feet and already pre-emptively moved on its absence and more hawkish phraseology coming from Janet Yellen.

The last couple of weeks have seen the dollar move into overbought territory, and although the last 48 hours have seen a small correction this is only likely to be a little bit of profit-taking before today’s statements.

Ahead of the open we expect the Dow Jones to start just four points higher at 17,853.

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