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Market Review:
Ahead Of The Fed and President Obama
In the daily market review with TheLFB trade team, Dan Cook, Snr Market Analyst at IG Markets, looks at the impact of the Fed and President Obama on Wednesday. Catch Dan, and TheLFB trade team on ForexTV Live.
EUR/USD – Through the European and heading into the US trading session have been battling back and forth waiting to commit to a direction ahead of some major fundamentals. Out of the Eurozone traders are still waiting for the final combined tally that makes up the German Preliminary CPI figures. In the US today, data will be released for both New Home Sales as well as the much anticipated FOMC interest rate decision and accompanying statement.
While it is expected that the overall position of the fed will not change, traders will be paying very close attention to any information the Fed may give with regard to the February 1st closing of many of the credit windows and any additional talk of term deposit facilities or reverse repo’s which are designed to pull dollar liquidity out of the market. As we head into the open of the US trading day the Euro has been staying very close to an important support level around 1.4220. There have been a few bounces higher from this particular mark; however, depending on the data today, if there is a break lower, from a technical perspective there is not a lot under this pair until around 1.3800.
GBP/USD – Sterling shrugged off a reading of negative 8 on the Confederation of British Industries (CBI) Realized Sales report and rallied through most of the UK trading session. This month’s CBI was the first time this report has been negative since last August; however, the positive sentiment on the UK economy provided by MPC Member Andrew Sentance earlier in the day far outweighed the sales figures. During his speech entitled “Economic Recovery, The Housing Market and Inflation”, Mr. Sentence admitted that while head winds remain and the road could be relatively bumpy, the UK economy is definitely on the road to recovery.
In one sentence in the speech (referring to the labour market) he stated “ I take this as a sign of medium-term confidence in the health and vitality of British Business, and a very encouraging sign for the UK economy to sustain an upturn.” In a previous interview Mr. Sentence had coined the term “bouncebackability” to describe UK economic resilience. As the US markets open the Pound has given back some ground as investors wait for the US FOMC decision this afternoon.
USD/JPY – The price action in the USD/JPY pair once again tells a story of global confusion as the safe-haven currencies battle back and forth around the mid 89.00’s. As questions continue to swirl around the reality of true economic recovery and investors anxiousness mounts ahead of the FOMC announcement these two currencies look to remain locked in a dead heat. As the World Economic Forum gets underway as well, traders will be paying attention to any indications from that conference which may suggest that either better times or continued struggles lay ahead.
Additionally, the world is waiting for tonight’s State of the Union Address by President Barack Obama. Will he get involved in another “war of words” with the US financial institutions? What is the outlook for the US economy through his eyes? Depending on the answers, or even perceived answers, to these and about 1,000 other questions we could see a very volatile Australasian trading session.