USD Remains Offered Ahead Of Tomorrow’s Minutes

The dollar weakness that opened the week has continued overnight as investors once again look for bets around a delay of stimulus withdrawal by the Federal Reserve at their December meeting. Data has not been the factor; most has been strong and weak in equal measure with little clear definition. Instead, speeches from FOMC members have the USD on the back foot.

New York Fed Chair Bill Dudley gave a speech yesterday that emphasised the strong nature of the US economy without once talking about tapering, and follows Janet Yellen’s confirmation last week that was viewed as very dovish by commentators. In fact, the only central banks that are tightening policy at the moment are those in emerging market currencies that are worried about inflationary bubbles from hot money inflows.

The Reserve Bank of Australia maintains rates this month at 2.5% and last night’s minutes showed a central bank that is moderately happy with the prospects for the Aussie economy. While the AUD remains “uncomfortably high” the board did notice that forward looking indicators have improved in the past month but growth in the near term would remain around the 2.5% level – a function of lower mining spending, weaker demand, and that overly strong AUD.

There is a lack of GBP data this week until tomorrow’s Bank of England minutes release. Last week’s inflation report will have taken most of the immediate news flow from the minutes release but surprises may still be found. Much like in the US, there have been a fair few MPC members expressing differing opinions on the bank’s forward guidance plans.

Martin Weale’s comments at the beginning of the week received a lot of press but it will be interesting to see how consensual the decision to amend the timeline of the UK economy hitting the 7% unemployment threshold was. The minutes are out tomorrow morning with nothing from the UK today.

The main piece of data today will be German ZEW – a survey of German business conditions both currently and expected in the future. Both are expected to be revised higher despite the fall in recent export productivity seen in Europe’s engine room. We are looking for a slight surprise to the low side and a softening of the newly resurgent single currency following a slightly inexplicable run higher since the middle of last week.