Despite the downward revisions to growth seen for the first quarter, the Fed is unlikely to waver from its course of tapering by USD 10 bln per meeting when the two-day meeting concludes today. Yesterday’s inflation numbers came in on the firmer side, in line with other recent indications on prices giving a similar picture and the labour market continuing to show steady signs of improvement. We are likely to see Fed Chair Yellen given a more considered view of policy at the press conference today, after the March gathering saw considerably more volatility as she was a little too candid in her choice of words in relation to the timing of rate hikes after bond purchases had ended. That said, if anything the risk to the dollar is likely to be to the upside should the Fed sound a little more hawkish.
Before then, the minutes to the June MPC Meeting are likely to attract more attention than usual. Last month, they noted that the decision to keep rates on hold had become more balanced for some and since then, we’ve had Carney’s speech last week suggest that rates could rise this year. Some viewed this as laying the ground for the minutes to show at least one person voting for higher rates. If seen, this will likely give some further support to sterling and allow cable to make a more sustained pushed above the 1.70 level. EURGBP is still the one to watch for a more sustained push below the 0.80 level.