FED to raise interest rates further

Daily Currency Update

The eagerly anticipated FOMC meeting minutes was announced yesterday evening, being the key currency data release for this week. It showed a number of FED members were in favour of a rate hike in June, but the majority agreed to pause. The minutes also showed that nearly all of its member supported more rate hikes in the coming months. This is due to concerns remaining over the unacceptably high elevated inflation and about the strength in the labour market. Prior to the minutes there was a 80% probability that the FED would raise interest rates this month and this probability has increased since. As it had already been highlighted that the FED were looking at 2 further hikes before the end of the year, data will likely drive whether the second rise will be as early as September. GBP/USD has traded in a narrow range above 1.2700 in the past 24 hours, likely seeing no surprise from the minutes released. Highs were seen at 1.2730. EUR/USD is also range bound, but has moved to the lower side on USD strength. The currency pair touched 1.0835 but sits above 1.0850 at time of writing.

Earlier this morning, German factory orders offered a shock greatly beating expectation. An uptick from the previous 0.2% was expected, with 1.1% forecast. New orders in manufacturing were up 6.4% in May, month-on-month. UK construction PMI missed forecast and showed contraction, falling below the 50.0 indicator. Later in the day, we expect jobs data from the US with ADP non-farm employment change, unemployment claims and JOLTS job openings. This runs alongside ISM services PMI between 1pm and 3pm. As an interest rate hike is all but expected in the US in July, data will likely drive when the additional rate hike will be before year end. Todays job data could be an indicator to this, and where the USD moves towards.