The U.S. Dollar is trading in tight ranges as markets stay on wait-and-see mode ahead of tomorrow’s Bank of England meeting and subsequent major central bank meetings next week. Yesterday, the greenback improved against commodity-based currencies based on fragility in the prices for raw materials and oil.
Federal Reserve official Lael Bainard’s opinion to delay changing the current easing status certainly calmed global markets, which had seen significant losses in the past three days. Indexes have been on the decline with the Dow Jones Ind. Avg. down 1.5% this week.
Tomorrow will be an exciting day for economic data as well as monetary policy with the BOE decision. Hawkish statements from Fed officials with a mix of caution and havoc across other major economies has pushed the “buck” higher, now trading 1.7% stronger since September 8th, according to the Bloomberg Dollar Spot Index. We feel the momentum is likely to continue if figures reach or exceed expectations.
The Euro continues to trade in familiar ranges as traders await other risk events. Although the shared currency has managed to climb in value and stay afloat as a safe-haven to the tumultuous nature of this year’s performance, there is renewed concern over the handling of debt for countries on the periphery, primarily Greece and Portugal.
The latter had failed to meet capital requirements in accordance with ECB regulations and its debt rating is below investment grade. The ECB may need to extend ease of borrowing to these nations whose fiscal situations have not improved as ideally expected with all the aid that has been provided.
The Pound’s recent steep fall has come to a halt after unemployment figures stayed at an 11-year low. Although post-Brexit economic indicators do not show a major sign towards recession, many analysts remain skeptical on the health of the economy long-term once negotiations start with the European Union to fully leave.
Investment and property values have been the most affected sectors of the UK economy thus far, but inflation is not picking up even with a currency still trading at its lowest levels in three decades. The BOE is expected to keep policy unchanged tomorrow, but there is downside risk for the Pound if economic forecasts are downgraded once again.