06/09/2017 - Fed Dovish On US Rate Hike

USD

The Dollar lost ground yesterday afternoon when Fed policymaker Lael Brainard said the US should be cautious about raising interest rates until it is confident of a rebound in Inflation which is falling well short of target.
 
In a speech by the Influential Fed Governor months of weak data that has pushed core U.S. inflation down to 1.4 percent were highlighted. Brainard said the central bank should go so far as to make clear it is comfortable pushing prices modestly above a 2-percent target.
 
Brainard, a permanent voting member on the Fed’s monetary policy committee who has in the past convinced colleagues to delay tightening, said there is a high premium on guiding inflation back up to target so as to retain space to buffer adverse shocks with conventional policy.
 
The Fed has raised rates twice this year and, according to estimates issued in June, expects to hike again before year end. Yet investors are sceptical and give a December rate hike about a 30 percent probability.

GBP

The Pound struggled early on after official figures showed activity in the UK’s dominant services sector has slipped to an 11-month low. Services, which accounts for 80 per cent of the UK economy, continued to grow in August but at a slower pace than during the first half of the year. The index tracks sentiment in the services sector fell to 53.2 from 53.8 in July. Any reading above 50 indicates that more businesses responded positively, anything below indicates more responded negatively.
 
This adds to concerns that the economy is losing momentum as rising prices and concerns about the Brexit negotiations take their toll.

Key Announcements

15.00 - USD - ISM Non-Manufacturing PMI; Forecast at 55.5 against previous of 53.9