Dollar boosted by Fed rate rise

Yesterday’s markets

15th December 2016

  • GBP - Average Earnings Index 3m/y: 2.5%
  • GBP - Claimant Count Change: 2.4K
  • USD - Core Retail Sales m/m: 0.2%
  • USD - PPI m/m: 0.4%
  • USD - Crude Oil Inventories: -2.6M
  • AUD - Unemployment Rate: 5.7%

Brexit news continues to be the main driver of the Pound yet the triggering of article 50 seems no closer. Yesterday Chancellor of the Exchequer Philip Hammond said the UK would probably need longer than the two years set out in treaties to negotiate Britain’s future relationship with the EU. Mr Hammond argued for a transitional deal which would give the UK an extended time to negotiate. Also yesterday, was the UK release of the average earnings index and unemployment rate. Unemployment remained sticky at 4.8%, whilst average earnings posted a better than expected 2.5% rise giving the Pound a boost yesterday morning.

The Greenback strengthened against the majority of its counterparties yesterday evening, as the Federal Reserve made history by raising interest rates a quarter point to 0.75%. EUR/USD hit a 21-month low, triggering a key psychological level, whilst GBP/USD slumped to a two-week low after the news. The Dollar was boosted by the first rate hike in a year and a surprisingly hawkish dot plot chart suggesting more than expected hikes are to come in 2017. Fed Chair Janet Yellen took a rare victory lap, signalling the economy is strong and will improve further, allowing the Fed to continue to raise rates next year.

Today’s markets

14th December 2016

  • CHF – Libor Rate
  • CHF – SNB Monetary Policy Assessment
  • GBP – Retail Sale m/m
  • CAD – Manufacturing Sales m/m
  • USD – Core CPI m/m
  • CAD – BOC Gov Poloz Speaks

Manufacturing and Services PMI’s are released from across the Eurozone with the main readings both expected to register in expansion territory at 53.9. The UK’s BoE meet this afternoon to decide on the last rate and asset purchases of the year. As there is no action expected to be taken, investors will look to see what the policy statement portrays and what action could be next. Across the pond, the States’ monthly consumer prices will hit the wires.