NEWS / Central Banks

Currency traders still looking at monetary policy as summer rolls on

July 25th - There hasn??™t been too much around on the economic calendar overnight to provide currencies with direction in the short term, but renewed comments from China that the country should look to diversify its foreign reserve holdings has proved sufficient to more than erase any dollar gains from the latter part of yesterday??™s session. With some key US economic data due later in the session, the dollar is likely to be a currency worth watching as the day unfolds and specifically the market is going to be looking for any suggestion that inflationary pressures are continuing to linger. Consumer confidence and existing home sales data will be scrutinised and although consensus is fast emerging that the US economy is now slowing, any suggestion that this isn??™t the case will increase speculation that Fed interest rate hikes will continue on into the fourth quarter of the year. With a slightly longer term outlook, attention is also going to focus on tomorrow??™s German IFO business sentiment reading. Again, a bullish figure here will bolster speculation that the ECB will add another quarter point at their meeting later next week. Essentially despite the uncertain geopolitical situation, it seems as if monetary policy is holding the key to directing currencies for the time being??¦

Wayne Roworth and Enis Mehmet