Dollar on the front toot

The dollar is on the front foot this morning following yesterday’s Fed meeting and has strengthened to under $1.1050 against the euro, so breaking out of that range of $1.11 to $1.14 that has held for the past while. With the euro feeling the brunt, the pound has actually managed to regain some ground against the single currency and is now trading at 91p (from close to 92p yesterday morning) although it is a little softer against the dollar at almost $1.21

The Fed cut its key interest rate by a quarter point as expected -to a range of 2.0% to 2.25% – but left the market somewhat unsure about its intentions looking ahead. It still seems likely that the Fed will lower rates again, but the market is scaling back the extent to which it might do, which is what is contributing to the dollar’s gains and which has also left US equity markets lower – all three indices closed down more than 1% yesterday – and bond yields slightly higher relative to where they stood just before the Fed meeting

GDP growth in the Euro Area slowed in the second quarter according to the advance GDP data released yesterday, to 0.2% (q-o-q) from 0.4% in the first quarter of the year. Also, both headline and core inflation fell in July, to 1.1% and 0.9% respectively according to the flash estimates, both well below where the ECB would like to see them which is the reason why it has clearly signalled that it is preparing to cut interest rates and/or restart QE in response

The Bank of England is likely to again keep interest rates on hold today – announcement at noon – and again say the future path for rates is Brexit dependent, while also acknowledging that protracted uncertainty is weighing on the UK economy at present which might require a cut in rates

Data due today include manufacturing PMIs in the major economies as well as the ISM manufacturing index and jobless claims in the US