Euro touches seven week high against dollar ahead of FOMC

Wednesday, December 16, 2015

The euro hit a seven week high against the dollar as investor confidence in the greenback was shaken ahead of today’s FOMC rate decision. The single currency traded towards the 100 day MA against the USD yesterday, hitting 1.1060 before selling off back towards 1.0900 as the market expressed its cautious optimism of a rate rise in the US for the first time in 9 years. While the consensus expectation is for an increase in US rates by 25 basis points to 0.5% investors are uncertain what impact this will have and the recent volatility across equity markets is indicative of this. Judging by recent currency moves it looks as if market participants have by and large priced in the expectation of an increase in interest rates, however, investors will be paying close attention to Janet Yellen’s comments and fears of any renewed dovishness could leave the dollar exposed to additional selling, particularly against the euro.

Despite these last minute jitters Asian equity markets rebounded strongly during overnight trading as the bullish mood spilled over from Wall Street and prompted a strong rally across all major benchmark indices. Japanese stocks led the charge higher with the TOPIX and Nikkei 225 adding between 2.5-2.6%. The rally higher was helped in part by a weaker yen which traded lower for the third straight session against the dollar, pushing past the 50, 100 and 200 day moving averages where it had faced firm resistance on Tuesday. At the time of writing the yen was trading just under 122.00 against the dollar and will likely hover around this level in the run up to the FOMC decision later today.

A relatively busy session for economic data today with UK unemployment data kicking off proceedings which will be soon followed by eurozone inflation data. Over in the US investors will have housing starts, industrial production and EIA crude oil inventories to pore through before the main event of the FOMC rates decision, after European markets close. Markets are expected to experience subdued trading in the run up to the announcement with commodity markets expected to trade well within range in the run up.  

EUR attempts to push higher against USD 

EUR Curncy Euro Spot Daily 16 2015 12 16 07 49 33

JPY weakens for a third straight session on rate rise expectations

JPY Curncy Japanese Yen Spot 2015 12 16 08 21 57

Events for today

0930

UK

Nov

Unemployment Rate

1000

EZ

Nov

CPI

1330

US

Nov

Housing Starts

1330

US

Nov

Building Permits

1415

US

Nov

Industrial Production

1530

US

w/e

EIA Crude Oil Stocks

1900

US

Dec

FOMC Rate Decision

2350

JP

Nov

Trade Balance

FN: 

Jan Crude WTI (NYMEX) 

 

Jan  Brent Crude (ICE) 

Topics: EUR, JPY, FOMC
More from: Kash Kamal