Daily Market Report 11/04/2013

The Federal Reserve suffered embarrassment yesterday as minutes from the Federal Open Market Committee meeting were released 5 hours before planned after the Fed accidently leaked them on Monday.

The meeting, which took place before last Friday’s disappointing non-farm payroll figures, showed that several members of the FOMC were keen on reducing the current US$85bn monthly Treasury and mortgage debt purchases – if the job market improved as they anticipated. With the addition of new jobs falling well below expectations for the month of March, it would be fair to say that members of the FOMC may look to change their stance at the next meeting.

Elsewhere the impacts of the Bank of Japan announcement on its stimulus program continued to dominate the markets with the yen falling to its lowest value against the pound since October 2009. Higher yielding assets continued to strengthen with the Australian dollar approaching all time highs against the pound, although further gains were muted as their unemployment rate rose to a three year high. The New Zealand dollar rose to an new all time high against the pound.

So where does this all leave investors looking to invest sterling? Despite the change of sentiment on the pound and speculation that the UK may avoid a triple dip recession, sterling may be disfavoured against higher yielding currencies in the short term especially in a week where there is no economic data to be released from the UK.

GBPUSD has been in a steady uptrend since 12th March. We could well see this continue in the short term given that the US dollar appears to be being sold off amidst the current increased appetite for risk. A threat to the uptrend could come if tensions between North Korea and the US intensify especially after South Korea announced yesterday that a missile launch from their neighbours could occur any time soon – Any political uncertainty would see investors flock to the safe haven of the US dollar.

But investors should note that confirmation of whether the UK is in recession or not will be found out on April 25th. Given that the pound has been supported recently on speculation that the UK may avoid a recession, if we discover however that the UK is in fact in another recession then we could well see sterling drop to the levels that we saw on the tail end of February.

Data from Germany has shown that the rate of inflation stayed at 1.4% in March but rose in France to 0.8% which has supported the euro this morning

As the rest of the day is devoid of any major economic data, markets may well continue to follow this week’s trend and higher yielding currencies may continue to trade higher.

Key Announcements:

13.30pm – USD – Initial Jobless Claims (6th April): Expected to fall to 365,000.