FOMC meets as markets snooze

Today’s the day (1)

Whilst it is eagerly awaited, today’s interest rate announcement from the FOMC at the conclusion of their two day monetary policy meeting is the most predictable in many years. In the first place Chairman, Janet Yellen has given markets more than sufficient advance guidance of what is needed from economic releases to provide a rate hike. Furthermore, Hawkish speeches from a number of her colleagues have cemented the certainty of a hike.

Traders are a fickle bunch and no sooner have the “conditions precedent” been fulfilled that they move on to the content of Yellen’s press release and the timing of the next hike coupled with likelihood of the Fed changing from a three hike to a four hike strategy.

The dollar has lost ground since making eight week highs against the Euro and Pound earlier in the week. Sterling bounced off its low at 1.2110 to trade a little more than 0.75% higher at 1.2215.

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Today’s the day (2)

The Dutch go to the polls today in one of the most complicated elections in Western Europe. Twenty eight Parties are jockeying for position and a seat in what is certain to be a Coalition Government.

The result, particularly the performance of Right Wing populist/nationalist candidate Geert Wilders, will be a barometer of whether the fervour of Trump and Brexit has spilled over into mainland Europe. In the light of the Diplomatic row that has developed between Turkey and The Netherlands since the weekend, the election will also be a vote of confidence in how Prime Minister Mark Rutte has handled the fallout.

The single currency has traded in narrow ranges continually running into standing sell orders on any approach to 1.0800. This level has capped the Euro since the start of the year and it is unlikely that this will change as the end of the first quarter approaches.

Dollar strength has also been in factor pushing the Euro lower but it will take a truly Brexit/Trump style result for the resistances between 1.0500 and 1.0275 to be breached.

French National Front leader Marine le Pen will be interested in how her ideological partner, Wilders, performs today as she continues to stand on an anti-EU, anti-Euro platform. Another key point is whether the incumbent Dutch Prime Minister will find a place in his Coalition Cabinet for Wilders given the antipathy between the two men. That has thawed slightly following Wilders faint yet decisive praise for Rutte’s handling of the Diplomatic spat that is ongoing with Turkey over the expulsion of two Turkish Ministers from Holland at the weekend.

Hogg resignation has no effect on Sterling

The storm in a teacup which has engulfed the newly appointed Deputy Governor of the Bank of England, Charlotte Hogg finally pulled her down. She resigned yesterday following her failure to disclose that her brother worked for Barclays Bank, an institution that she was supposed to be overseeing in her “financial supervision” role.

Whilst it is a pity that the BoE lost a talented economist and useful counterbalance to the more relaxed attitude of the Governor. By the same token it displays the reality that those in such positions cannot be seen to consider themselves above the rules that have been put in place to give confidence to the public.

Hogg’s resignation had no effect on the pound but moving forward Governor Carney and Finance Minister Hammond will need to fill roles on the MPC promptly since policy will need to be determined quickly and efficiently once Article 50 is triggered.

There are headwinds coming for the pound with the start of Brexit negotiations and the irritating stance being taken by Scotland’s First Minister Nicola Sturgeon over a “R2”; a second independence vote. In contrast, the economy continues to confound the “merchants of gloom” but it remains to be seen if Carney and the MPC can steer a course through what are sure to be choppy waters.

Against the Euro, the pound has been fairly stable gaining on 12 of the last 15 trading days. Ranges have been narrow and standing orders have placed orders to buy pounds below the support at 0.8300. This rate was last seen in December 2016 and is considered major support.