Hawkish McCafferty boosts the Sterling

Yesterday’s markets

14th July 2017

  • USD - PPI m/m: 0.1%
  • USD - Unemployment Claims: 247K
  • USD - Fed Chair Yellen Testifies

Sterling bounced back yesterday morning after an interview was released with Monetary Policy Committee member, Ian McCafferty. McCafferty said he would be looking to vote for a quarter-point interest rate rise again next month after joining other hawks, Kristin Forbes and Michael Saunders, in June. He mentioned that the BOE should not wait until inflation levels are closer to normalisation before starting the quantitative easing programme, as other central banks are already thinking about it. The MPC members seem split on whether to raise rates in August, as three members have already voted for a rise, although Kristin Forbes has since left, and Andy Haldane is hinting that he is leaning towards joining them shortly.

Fed Chair, Janet Yellen’s testimony to congress continued yesterday. Yellen indicated that it would be a gradual process to unravel its balance sheet but there would continue to be interest rate hikes. Yellen also mentioned due to the tightness of the labour market, the US might start to see higher wages and prices, allowing for the gradual rate rises. However, her overall dovish stance over the two days testimony caused the Dollar to fall back and the Dollar Spot Index to fall to the lowest rate since September.

Today’s markets

13th July 2017

  • USD - CPI m/m
  • USD - Core CPI m/m
  • USD - Core Retail Sales m/m

The focus will be on the US today with the release of the CPI and retail sales figures, both expected to bounce back up to 0.1%. FOMC member Robert Kaplan will be speaking about the Federal Reserve and monetary policy at the Centre for economic studies of the private sector in Mexico City. Questions from the audience are expected.