Fed’s Beige Book to be Released
The US dollar fell against 12 of the 16 most traded currencies in advance of the release of the Federal Reserve’s ‘beige book’ which is a summary of regional economic conditions. Many investors see last week’s weak US employment figures as pointing to a prolonged US recovery. Andrew Wilkinson of Interactive Brokers Group stated, “The lackluster momentum for the U.S. recovery has resumed and that seems to be undermining the dollar right now.” The Fed will release the beige book today and the report is used as a basis of discussions at FOMC meetings. Joseph Trevisani of FX Solutions Inc. pointed out the importance of the beige book report and said, “Past Beige Books have said the same thing, that things are slowly getting better, but today’s is probably going to be toned down. The market is really looking for something that will change the current complexion of things, and the Fed has been making some noise about pulling liquidity.”
Pound Gains on BOE Statements
The pound gained 0.7% against the greenback trading at $1.6282. The pound also gained against the euro and yen. The pound was lifted after Bank of England policymaker Andrew Sentence told the Guardian newspaper that the BOE may adopt a ‘wait and see’ approach to it’s program of quantitative-easing. The pound was also bolstered by better than expected UK industrial production data. Adam Cole of the Royal Bank of Canada stated, “The comments from Sentance gave a sniff of a turn in the U.K. rate cycle, and that lifted the pound. It’s a bit premature in our view, but the comments moved the markets.”
Yen Falls Broadly
The Japanese yen fell broadly as stocks rose. Currency experts now say the yen is the currency of choice for carry trades. David Deddouche of Societe Generale SA in Paris said, “The yen is clearly now the funding choice for the carry trades. As long as we stay in the sweet spot for equities, the yen has weakening bias.” On Thursday the US weekly employment figures and retail sales figures are due to be released.
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