Euro hits six month high against Dollar as markets await FOMC minutes

Tuesday saw Sterling have a mixed
day as it continued to perform well against the US Dollar but had a
mixed session against Euro as it started towards 1.34 on EURUSD.
There was no real reported news for the move but this was likely as
the Euro was going through a few levels and could possibly signal
investors believing that the Fed will not start to Taper in
September but possibly towards the end of the year. One thing is
certain, if the employment data continues to improve Ben Bernanke
will want to start to taper before he leaves office in early
February.

EUR –

After some pretty uneventful
numbers being released from Europe yesterday, EURUSD moved to a 6
month high as it knocked out some resistance levels but that is
unlikely to hold throughout today until the meeting minutes are
released in the afternoon. The state of the Euro will largely
depend on a Hawkish or Dovish tone from the meeting minutes. Today,
Flash French and German PMI’s are expected to grow
in Manufacturing sector (50.4 vs 49.7 in July and
51.1 vs 50.7 July respectively) but French Flash Services
PMI will show a decrease for August after the positive
revision higher for the July figure to 51.7 from 51.3

GBP –

With nothing to note coming from
the UK yesterday, it fared well against USD and had a bit of
volatility in the EURUSD movements of the afternoon dropping below
1.17 for the first time this week. Today’s CBI Industrial
Trend Orders are unlikely to move the markets much but
Public Sector Net Borrowing figures will be more
closely watched as it is expected to show a deficit for July as the
government continues to struggle with public finances, -4.7bln is
expected against a surplus of 10.2bln last month. These figures
aren’t going to be game changers in the market but if they are
rosier then predicted GBPEUR show push above 1.17 again. The
biggest mover will be GDP preliminary figure on
Friday which will be a telling sign if the UK economy is
still on the mend, so without positive or inline data then Sterling
will likely come under pressure from Euro.

USD –

Today, the Fed releases its July
FOMC meeting Minutes, which could prove to be a bearish spur for
the Greenback. Many emerging economies have been seeing a capital
outflows on the expectations of the Fed reducing QE3, so any
further talk of tapering is likely to hit stock markets and funding
projects hard. Also, before the meeting and before Friday’s Jackson
Hole Annual Symposium, we have existing home sales which are
expected to show firmer growth again. All in all, this will be the
biggest game changer of the week and will likely give the direction
for the markets for the month to come.

 INR –

Indian rupee has continued and will
most likely continue to weaken as it has hit all-time lows against
Sterling and US Dollar. The Rupee has suffered this year as the
nation struggles with the slowest growth in a decade and has led to
capital outflows from investors. Without any structural reform from
the RBI it is likely to breach 100 against Sterling in the coming
weeks.