Coming Up Today (all times GMT)
- CAD Housing Starts (12:15)
- USD FOMC Statement (18:15)
- USD Federal Funds Rate (18:15)
- CNY Consumer Price Index (02:00)
Since the last Fed's Open Market Committee (dated June 23rd), overall economic indicators - ranging from business activity to employment data and private consumption - have hinted that the pace of the US recovery has been slowing. Last Friday, the release of July's lackluster unemployment report confirmed this gloomy scenario, as American businesses remained reluctant to hire new staff, fearing global uncertainties and recession risks.
In this context, it is expected that the FOMC will keep the federal fund rate unchanged. At the same time, it is likely that Fed Members will debate whether to restart asset purchases programs in order to lower long-term interest rates and boost economic growth.
Encouraged by the prospect of new stimulus measures, worldwide stocks markets (aka risky assets) advanced yesterday and the dollar stopped falling against the sterling, the euro and the yen.
The pair faces two scenarios. Should the Fed adopt new easing measures, it could spark risk appetite among investors and favor equities and risky currencies at the expense of the dollar. However, if the Fed maintains its current monetary stance, it could bring potential upside for the dollar.
After failing to break above the 1.6000 resistance level last Friday, it seems that the pound has lost some of its momentum. It may be the effect of investors rotating their portfolios towards the euro, ahead of the publication Wednesday of the Bank of England inflation and growth projections.