FOMC Minutes Come Into Focus This Week

It should be a fairly quiet trading week, with little high impact news out early – though trading should pick up over Wednesday and Thursday as the FOMC minutes are released as well as employment data for several countries.

The FOMC minutes for the previous Federal Reserve meeting are released on Wednesday this week. Given the lack of other high impact news, traders may look for any clues in the minutes towards concerns over euphoria in stock markets and high yield credit, as well as volatility compression that seems a feature of the current market environment. As employment data released last week continues to confirm the US recovery is well under way, analysts will be on the lookout for any hints that rate rises are being discussed. Given that inflation remains low and that the recent uptick in inflation is considered transitory, this may not eventuate at this meeting.

US Unemployment claims are also due to be released on Thursday – volatility in employment data has dropped off in recent weeks so any surprise change could signal a shift in trend and spark some movement in currency markets.

Wednesday also sees the release of Chinese CPI data, which will be looked at to confirm China’s recent bounce in economic strength. The CPI release, along with Thursday’s Australian employment data should provide some movement in the Aussie Dollar and the AUD/NZD cross – which has been falling since 2011 on commodity price weakness and RBNZ rate rises. A strong employment figure could signal the RBA’s rate cuts are finally taking hold and swing expectations towards the next move being a rise in the cash rate.

Pound volatility should increase with the release of Manufacturing PMI on Tuesday, as well as the BoE monetary policy decision on Thursday. The Pound has been hard to keep down since Mark Carney suggested that rate rises were likely to occur sooner than the market expects. Traders will find either some confirmation or disappointment in the BoE release this week.