A Triple Header, The FOMC Minutes, The Bank of England & The European Central Bank

fed reserveCentral banks and jobs data take center stage as trades prepare for the dual meetings later today by the Bank of England and the European Central Bank. Neither bank is expected to make any policy changes. In the UK if the BoE holds rates and policy, the bank governor is not required to make a public statement. Mr. Carney though very vocal and outspoken since taking the reins at the central bank is expected to remain mute today. On the other hand we have Mr. Draghi who relishes the spotlight and loves to send the currency markets on wild rides with promises and visions. Mr. Draghi has successful led the eurozone and the central bank through a serious crisis but speculators are getting tired of Mr. Draghi’s word and lack of action. Although 2 months ago the ECB reduced its interest rate by 25bps which had little consequences to the market or the economy. This week eurozone data leaves investors wanting more action. Unemployment printed at 12.1% which was expected but remains at a record high with no improvement, while the US and the UK along with most of the other major economies are showing steady growth and improvement. The UK is expected to begin to increase interest rates as the housing and jobs markets have shown the ability to stand on their own. In the US the Fed have already begun tapering and yesterday’s release of ADP private payroll data is indicating the private job sector is doing much better than forecast. Traders are now anticipating Friday’s nonfarm payroll release ahead of the January 29th FOMC meeting where odds are that the Fed will increase their tapering of monthly asset purchases. The euro is currently holding at 1.3583 adding 8 points against a very strong greenback as traders take position ahead of today’s meetings. The US dollar has climbed to trade at 81.20 after spending the last 60 days bouncing between 79 and 80. The US economic situation remains bright with a recovery moving full speed ahead. US GDP has been increase to over 4% and unemployment has tumbled to 7% and could print lower on Friday. Consumer confidence, retail sales and manufacturing all remain in positive numbers. Following close behind the US in its recovery is the UK, where David Cameron’s government’s financial and economic austerity plans have turned the UK into one of the most successful economic powerhouses. Just a year or so ago there were violent protests in the streets over austerity measures and today those same protestors are apologizing to the government for doubting their plans. The pound is trading at 1.6450 in the green this morning and well above its forecast range for the end of 2013.  Mr. King and previous Governor of the Bank of England should be given a pat on the back for his guidance of the central bank.

Across the Atlantic the US central bank is again a prime focus with the FOMC minutes released on Wednesday evening. The minutes reflect what makes knew or suspected that the drop in unemployment was the prodding factor in the Fed decision and that the Fed is being extremely cautious in its tapering plans, but the minute seemed to indicate that if the economic situation and the jobs market continues its recovery that they are ready to being lowering monthly asset purchases. The odds have now shifted in favor of a larger reduction at its next meeting which is the last meeting for Mr. Bernanke as Janet Yellen takes the reins at the Fed come February 1, 2014.

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