Markets Quiet After FBI Controversy and Ahead of BOE Meeting

 

USD

The U.S. Dollar is trading in very quiet ranges after yesterday’s bombshell firing of Federal Bureau of Investigation Chief James Comey after market participants were going home from work in North America. The late news was a tremendous shock to commuters and news cycles, which immediately started questioning the bizarre and sudden nature of his dismissal as the crucial agency is in the midst of investigating potential ties between Trump’s campaign and Russian officials/hackers. Import Prices increased by 0.4% excluding petroleum, but again, the FBI Director was fired, not asked to resign, he was fired.

Without much data in the works, we are watching market reaction to news developments about Europe unifying against the UK in Brexit talks, potential conflict in the Koreas as a new liberal president was elected, and American scandals. Boston Fed President Eric Rosengren will speak today, and if attention is paid to him and he’s dovish, it’ll be a good thing for the “buck.” Other Fed officials have spoken in the last few days, but there was not talk of monetary policy, thus we’ll see if it’s an agreed upon covenant between them all.

 

EUR 

The Euro is floating in familiar ranges even after a speech by ECB President Mario Draghi to Dutch lawmakers in The Hague where he was confident about current economic progress. Nevertheless, Draghi did not hint at increasing rates nor changes to the easing approach, keeping a cautious tone since he said that the central bank’s job is not done.

As unemployment has dipped, especially in countries with high double digits like Spain, and inflation has increased some traders out there feel Europe is due for serious tightening. However, with so many moving pieces and nations like Italy and France under-performing the Euro could be held down for the near-term.

 

GBP

The Pound has been stagnant for days after a rapid and aggressive appreciation experienced in the last two months. Economic indicators unexpectedly improving and a determined Theresa May have boded well for Sterling. Tomorrow’s Bank of England meeting will likely end in no changes to policy, but there will be revisions to the inflationary and gross domestic product outlook.

If Governor mark Carney sounds very optimistic, it’ll be a surprise, but considering recent multi-year best figures especially in PMI, the forecast will be rosier. We see Pound gains as limited because Brexit brings along labor disruptions as companies decide to step away from a nation exiting a 27-nation single market with open borders.