The minutes from the FOMC were on the whole a “non-event”. Non-event in that there was not much information to confirm one way or another how the FED/FOMC will act on the 21^st September meeting. In fact there are some members of the FOMC who are now saying it is too early to raise rates again given the slowdown in China and Brexit consequences. How right they are!! While NFP for July showed solid employment growth I believe the FOMC members should be patient and wait for further strengthening activity from the US/China/EU and UK. The minutes stated that “regarding the near-term outlook, participants generally agreed that the prompt recovery in financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook that they had faced at the time of the June meeting.” In other words the members were not willing to stick their necks out and give the US economy the all-clear for the September rate hike.

The result of the minutes sent the USD into somewhat of a freefall sending the EURUSD above 1.13 and GBPUSD 1.31 (GBPEUR back from the abyss to trade circa 0.8625/1.1600). I think over the coming weeks we are likely to see much of the same with the greenback trading soft as a result of the inconclusive rate hike decision in September. Granted it will be a very interesting meeting that day and a rate hike will be a serious call by the FED that the US economy (and global economy) can withstand and accept a US rate hike. Whether that is right or wrong will only be known in the months that follow as the financial markets digest further US rate hikes.

Already December is being pencilled in as another potential date to hike rates, so I think I would be quietly confident that a September rate hike will be followed by a December see how the hike filters through before recommitting to another hike.

The FED have made it clear to us all that their hike path is both US and global data dependent so a growing US economy vs slowing global economy will surely give the FED some food for thought.

For now then the GBP is likely to follow the USD’s path and trade above 1.30. We know that the negotiations on Brexit will only start at the earliest late 2017 so really between now and then it’s business as usual. In fact it would not surprise me if we saw the GBP rally some more especially into the FOMC September meeting.

Wishing you a good and pleasant weekend

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