Collinsonfx Daily Market Commentary

Markets were quiet ahead of the FOMC and ECB rate decision. Expectations were that both Central Banks would leave interest rates unchanged and allow QE to do it's work. The US Dollar was softer ahead of the rate decision, as liquidity allowed softer bond yields, while the EUR was steady at 1.1090. The GBP traded strongly at 1.3170, ahead of the most important election since WW2, with the strength of the currency reflecting the strong showing in the polls, of the Conservatives. PM Boris Johnson is likely to win and effect Brexit. This would be a massive boost to the British economy and would be reflected in the currency, just for economic certainty, without mentioning all the possible trade benefits.

The softer US bond yields translated into a weaker Dollar, which allowed the AUD to jump to 0.6860, while the NZD traded above 0.6550. The NZ Government released plans to bring forward fiscal expenditure to aid and assist the accommodative monetary policy and boost the local economy. This has boosted economic prospects, which reflects a similar situation in Australia, with massive infrastructure projects being brought forward. US CPI came in a healthy 2.3%, while the labour market is at 50 year records, allowing the Fed to resist taking further action on interest rates.

Markets await the British election, the FOMC and the ECB rate decision tonight, which all have the capacity to radically move markets, if they do not come in as expected.