Quick Notes on EUR/GBP, FOMC

EURGBP Daily 200814

Hello, Friends. Currencies generally respond quickly to changes in the market’s perception of future interest rate differentials. My current favorite short, EUR/GBP, had a rough day yesterday as inflation data seemed to indicate that interest rate hikes might be farther off than previously anticipated. All is forgiven this morning, as the minutes from the Monetary Policy Committee (the Bank of England body that sets short term rates) meeting in August showed that two members were already in favor of a hike.

There are nine members, so the vote was still 7-2. The significance is that the votes for many months prior had been unanimous, and so the market is now moving its view as to when rates will begin to rise forward. That’s good for GBP; of course, currency trading is all about ratios, but in this case, there isn’t much positive happening on the other side of the divisor, EUR. Traders involved in the latter should be aware that European Central Bank President Draghi will be speaking at the Fed’s Jackson Hole conference on Friday. The assembled multitudes get Fed Chair Yellen for breakfast, Dr. Draghi for lunch. Quite the day for policy wonks, and potentially for fixed income and currency traders.

For those who trade futures, which is probably most of us here, please also note that the minutes from the FOMC’s July meeting will be released this afternoon. The time is normally around 2 PM EST, although that isn’t written in stone. As the headlines hit, there is the possibility of some random turbulence, and I plan to have positions squared up by then.

That’s it for now; as always, best of luck today!