The focus is on monetary policy over the next two days, with the FOMC meeting set to commence today, cumulating in the press conference tomorrow, which should create fewer waves than the last meeting press conference in March. Sterling remains firm into the CPI numbers due at 08:30 GMT, with the headline rate seen falling to 1.7%. An interview overnight with one of the MPC members (Miles) has added to the sense that rates are going to rise earlier than previously anticipated. He acknowledged that the probability of a rise this year, as priced into markets, was probably too low, at least before the Governor’s comments last week. Cable remains below the 1.70 level and the minutes to the June meeting, released tomorrow, could well be the determining factor as to whether we see a break of the 1.7043 level reached in 2011.
The overnight session has seen both the Aussie and less so the yen weaker. The Aussie weakness came on the back of the latest RBA minutes, which suggested that rates were going nowhere and removed any residual expectation that rates could move higher. Once again, the Aussie has moved away from the 0.94 level, which has proved to be tough to break on a sustained basis so far this year. The yen has once again been put back into the box, further establishing the range that has held for more than two months now on USDJPY, which finds itself back towards the 102.00 level. As for the single currency, it has found a base above the 1.35 level after the policy measures announced earlier this month. The further lending measures don’t come in until September, whilst the negative deposit rate was never going to have a major impact, so the euro bears may still have some time to wait.