The GBPUSD pair continued to trade in a manner that is unchanged from the day before as the FOMC minutes failed to have much of an impact on the pound or any currency for that matter. The minutes was very much anticipated by a lot of traders in the hope that it would bring in volatility and dollar strength but the confused tone of the minutes meant that the dollar continues its choppy trend with the GBPUSD pair also following the same pattern.
GBPUSD Continues to Consolidate
It was expected that the Fed members would give some direction and hints on how they would tackle the balance sheet and also on when the next rate hike would be but they did not address either of these issues. And as Yellen noted, they also noted that the weak inflation data in recent times was only a blip for now and that they expected the inflation data to be back on target in the coming months. This is a clear indication that the Fed would be looking ahead to the incoming data to gauge the strength and the progress of the economy and then make a decision on when the next rate hike would be.
As mentioned in our earlier forecasts, the focus would be fully and clearly on the dollar for this week and all other events and currencies are likely to take a backseat. With the Fed also subjecting itself to the test of data, the incoming data from the US in the coming months would be very crucial and watched very keenly to see if they show enough strength for the Fed to start considering rate hikes again.
Looking ahead to the rest of the day, we do not have any major data from the UK but we have the ADP employment data and PMI data from the US. Of these, the ADP employment data would be watched very closely as it is a precursor to the NFP and would be noted to see if there is any improvement in the employment data.
This article was originally posted on FX Empire