21 Sep 2017

Market Brief: We begin across the Pond and on last night’s FOMC rate decision where the Federal Reserve (Fed) kept interest rates on hold as expected, maintaining the Federal Funds Target range at 1.00-1.25%.

Kevin Musisi

Dealing team

Today's data release
  Key levels
09:30 UK public sector finances   Support Resistance
13:30 US jobless claims 1.3450 1.3660
13:30 Philadelphia Fed manufacturing 1.230 1.1400
14:30 ECB's Draghi speaks    
Market overview

The Fed acknowledged that economic activity is rising modestly this year and referenced the continued strength of the labour market. They also remarked that the recent hurricanes were unlikely to alter the medium term economic outlook. Going into the announcement, softer US inflation had put question marks on whether imminent rate rises should be warranted and this had led to some expectations that the Fed might revise its projections on interest rates. However the Fed maintained a hawkish stance and its projections pointed to one further interest rate hike this year (most likely December) and three in 2018.

Away from interest rate policy the big decision that came last night was the confirmation that the Fed would begin the unwind of QE in October. As previously presented the Fed will allow the balance sheet to begin reducing at a monthly pace of $10 billion, before gradually increasing that limit to $50 billion per month. Consequently, the dollar was firmer following the announcement and this morning the green back is back below 1.3500 vs the pound and below 1.19 vs the Euro.

Back home, it appears the Conservatives are showing more unity now that the PM Theresa May has supposedly made peace with Foreign Secretary Boris Johnson following his resignation speculation on Tuesday. With the Fed announcement now behind us, all eyes will be on the Prime Minister (PM) and her key speech on Brexit in Florence tomorrow. Various reports this week have suggested that the PM was preparing to offer €20bn in budget contributions to the Europeans, as part of the Brexit divorce bill, however the EU have previously said that the UK has net liabilities of about €60 billion so it remains to be seen how May’s supposed offer will be received.

Thought of the day

The UK has led the way as we now have the first supermarket in the world to allow shoppers to pay for groceries using just the veins in their fingertips! Customers at the Costcutter store at Brunel University in London are the early adopters. The firm behind the technology, Sthaler, is in talks with other UK supermarkets to adopt the high-tech finger vein scanners. The scanners work by using infrared technology to identify people by their finger veins, this then links via a unique biometric map to their bank details stored with payment provider Worldpay. According to Sthaler, vein technology is the most secure method as it cannot be copied of stolen. FX markets can sometimes feel like “finger in the air” thinking at times with so many factors effecting the market, at Investec we use a Treasury Roadmap to analyse your exposures and help detect your risks. To schedule your own FX Deep Dive please contact your Investec Dealing team on 0800 055 6339.

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