Last Night Federal Reserve’s policy announcement illustrated a dovish tone pushing the US Dollar onto the back foot today versus the majority of the world’s most actively traded currencies. The FOMC acknowledged that the US economic recovery is gaining momentum with growth in household and investment spending steadily increasing.

The picture in the US isn’t however all positive there are still significant constraints affecting the recovery. Primarily these are concerning labour market trends and low inflation. The Fed indicated for the first time in 12 months that any move in interest rates is unlikely with a unanimous vote from the committee to maintain rates at their current levels.

Sterling staged a partial recovery versus both the dollar and the Euro yesterday following news that Martin Weale joined Andrew Sentence in voting for an interest hike illustrated in the BoE minutes released yesterday morning. Despite the hawkish tone of the minutes, upside movement in the markets has been limited with any rate hike in the near term now unlikely with the flailing UK economy.

BoE Governor Mervyn King has clearly stated that he was not in favour of near term policy tightening, with the view that inflation will ease once the market accepts the VAT rise and rising commodity prices.

Today sees the release of the Confederation of British industry distributive trades survey for January, this will he help to provide insight for any signs of a recovery on the high street for the first few weeks of the year.

Best Regards
Luek Zorab
Torfx Curreny Dealer

“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”