FOMC Meeting Minutes in Focus This Week

October 6, 2014 – Weekly News

EUR/USD

Last week the EUR/USD remained under pressure and continued to trade with bearish sentiment. By the end of the week the pair fell below 1.2500 meaning that 400 pips were erased during the past 2 weeks. The Euro has been weakening on the back of negative news from the Euro area as inflation does not seem to be picking up despite interest rates being cut at the begging of September. On Thursday, Mario Draghis speech was dovish, however, the main movement for the pair was the Non-farm Payroll data. The U.S. Dollar strengthened as the unemployment rate in the U.S. fell to a 6-year low boosting speculation once again over an earlier interest rate hike.

This week we should pay attention to the new strong support level at 1.2500. This level might be broken if German Factory Orders data coming out on Monday is negative. On Wednesday, ensure to watch the FOMC Meeting Minutes and on Thursday, listen to what Mario Draghi will say at the Brookings Institution, in Washington DC.

GBP/USD

The GBP/USD dropped sharply during last week. The pair started at 1.6250 and dropped 300 pips to 1.5950 over the past 5 trading days. The pair reacted to the great U.S. labour data which pushed the pair below 1.6000. The pair is currently trading at its lowest value since November 2013 as Bank of England policy maker, Ben Broadbent, stated that the economic recovery might not be strong enough to increase interest rates. Previous speculation that there could be an interest rate hike in February subsided and it is now expected to happen in June.

This week we should pay attention to the U.K. Manufacturing Production on Tuesday, the FOMC Monetary Meeting Minutes on Wednesday and on Thursday we should watch the U.K. Official bank rate announcement.

GOLD

Gold plunged and fell as low as $1,182/ounce following the strong Unemployment data from the U.S. The price has traded around $1,180/ounce twice since 2010. The first time was in June 2013 when the first hints about the scaling back of the U.S. quantitative easing program appeared. The second time was in December 2013 when the Fed withdrew the first $10/billion a month from the monetary stimulus. This time, the price is heading down as investors believe that an earlier interest hike is more likely in mid-2015.

The lower price could stimulate physical demand and we could see bullish movement soon. Another big drop may come with the FOMC Meeting Minutes which are being released on Wednesday.

Economics events (GMT time):