13/10/16 - Fed Indicates Year-End Hike

GBP

Sterling rebounded from a record low in trade-weighted terms on Wednesday, after Britain's Prime Minister said she would give lawmakers some scrutiny of the Brexit process and would seek "maximum possible access" to Europe's single market.

After a brief period of stability, the sell-off has worsened again in the past fortnight, on a series of signs that the government would prioritise controls on immigration over access to the European single market.

May moved late on Tuesday to appease some lawmakers in her ruling Conservative Party by allowing a motion proposed by the opposition Labour Party for a "full and transparent debate" on how the government will enact the public vote to leave the EU. However, while that agreed to demands for parliament to debate her government's plans, it also ruled out letting it vote on triggering the formal Brexit procedure.

Brexit Minister Davis also banged home the message that it is the government that will decide when to trigger Article 50, the formal legal process for leaving the European Union, before beginning exit negotiations.

 

USD

The minutes of the Federal Reserve’s September 20-21 meeting, at which rates were held steady, showed that several voting Federal Reserve policymakers felt that a rate hike would be warranted "relatively soon" if the U.S. economy continued to strengthen. However, doubts due to inflation remained.

Some members believe that with the US already near full employment, inflation could rise too quickly if rates are not hiked in the near term. Three of the Fed’s voting members voted in favour of an immediate rate hike. Since the meeting, Fed Chair Janet Yellen as well as several other policymakers have said they expect a rate hike before the end of 2016, should the labour market and inflation continue to strengthen.
 

Key Announcements

13:30 – USD : Unemployment Claims; Forecast at 252k against a previous of 249k

16:00 – USD : Crude Oil Inventories; Forecast at 0.4M against a previous of -3.0M

Tentative – GBP : BOE Governor Mark Carney speaking at the future forum in Birmingham