Hawkish FOMC members boost the Greenback

The US dollar has managed to recoup its losses during yesterday’s trading. After disappointment at the US Federal Reserve’s interest rate decision last week, the US dollar lost ground – but then Fed members James Bullard and Dennis Lockhart indicated in their speeches yesterday that interest rate rises are still on course for some time later this year. This is largely because monetary policies continue to remain divergent.

The Greenback, with stronger growth prospects from the economy, continued to find support. The hawkish tone from the Federal Open Market Committee members has raised investor confidence and relayed through as EUR/USD is trading two cents lower, at 1.1170.

Redbook numbers are out today, as well as the Richmond Manufacturing Index data. Mr Lockhart will give another speech today that will provide direction for further monetary policy, while Eurozone consumer confidence data will provide direction for the euro.

Euro: ECB speech later this week

With ECB members indicating that the bank may be keen to continue further asset purchases beyond the current schedule, focus will turn to Mario Draghi as he takes centre stage in his speech later this week. While the Eurozone has remained accommodative in adding stimulus, ECB members are willing to continue further asset purchases until inflation and growth levels elevate.

Sterling relies on dollar and euro for direction

Sterling edged lower in trading yesterday after comments from US Fed officials sent it drifting below the 1.55 mark. With the Bank of England not moving on interest rates till at least next year, the pound will continue to trade on events from the US and the Eurozone and their varying monetary policies in the near term.

With rate rises off the table for 2015 from the UK, the pound could come under further pressure once the US moves to increase interest rates. Currently GBP/USD trades at 1.5490, and markets will look towards the CBI industrial orders data, as well as the public sector net borrowing numbers for further direction.

Have a great day.