Fed make history as they raise interest rates

Yesterday’s markets

16th March 2017

  • GBP - Average Earnings Index 3m/y: 2.2%
  • GBP - Claimant Count Change: -11.3K
  • USD - CPI m/m: 0.1%
  • USD - Core CPI m/m: 0.2%

All focus was on the Fed meeting yesterday evening as markets awaited to see if the FOMC would raise rates for the second time in three months.  As widely expected, US interest rates were increased from 0.75% to 1%.  There was not much movement for the Greenback as the hike of a quarter of a percentage point, the interest lay with the comments from the Fed Chair Janet Yellen.  The tone was more dovish as Janet Yellen pointed to a further two increases this year as the FOMC members stated they have some confidence in the path the economy is on.  This gradual policy tightening pledge of just two more rises for 2017, and the fact that Fed member Kashkari dissented, had the markets rapidly selling off the Dollar.  Moving forward, there will be continued interest in the growth, inflation and labour market data to decipher when the next move from the Fed may come.

Economic data was thick and fast yesterday as we had key releases from both the States and UK. Firstly, labour data from the UK impressed economists’. UK unemployment dropped to over a decade low of 4.7%, the claimant count also fell unexpectedly to 11.3k. In the States, the US released a raft of inflation data and posted its retail sales figure yesterday afternoon. The data was better than expected with CPI moving into positive territory at 0.1% and retail sales registering 0.2% helping the Dollar claw back its earlier losses.

In the Eurozone, polling in the Netherlands general election started yesterday. Voters chose from among 28 different parties vying for the right to form the next Dutch government.   The far-right Freedom Party failed to claw back ground against the winner who retains the PM for a third successive term, Mark Rutte of the VVD party.  The anti-immigration freedom party of Geert Wilders were easily beaten in the end and had PM Mark Rutte stating on his victory that the Dutch people rejected the wrong kind of populism.  

Today’s markets

15th March 2017

  • JPY - BOJ Press Conference
  • CHF - Libor Rate
  • GBP - MPC Official Bank Rate Votes
  • USD - Unemployment Claims 

The Bank of England meet to decide on the interest rate and current QE program today.  However, with no monetary policy changes expected to be made, the focus will be on the press conference that follows. Mark Carney, Head of the BoE will speak about the current economic conditions, plus any possible changes the MPC could implement if needed.  From the Eurozone, the yearly inflation figure is expected to stay true at 2%.  Later in the afternoon, the US release their JOLTS job openings and the Philly Fed Manufacturing Index, with both gauges expected to show less growth than previously posted.