15/12/16 - FED Delivers On Rate Raise

USD

The dollar was the main focal point of trading yesterday as market participants were anticipating an interest rate hike by the Federal Reserve for the first time this year. Janet Yellen delivered on the expectation which was widely priced in to raise interest rates by 25 basis points to 0.75%.  The Federal Open Market Committee cited “realised and expected labour market conditions and inflation” in increasing its benchmark rate a quarter percentage point, according to a statement Wednesday following a two-day meeting in Washington.

The raise comes after key inflation data shows the rate of inflation very much on track for the Feds 2% target, along with strong employment figures in recent times. The FOMC stated they expect to see the labour market strengthen over time, especially given the president elect’s drive for increasing America’s manufacturing sector in conjunction with Mr Trumps pledge for growth fuelling tax cuts and infrastructure spending. New projections from the dot plots also indicate central bankers expect three quarter-point rate increases in 2017, up from the two seen in previous forecasts from September.
 

GBP

Sterling strengthened on Wednesday after comments from Britain's Brexit Minister bolstering expectations that Britain will keep access to the single market when it leaves the EU.

The pound appeared largely unmoved by data released earlier on Wednesday that showed the first decline in the number of people in work in Britain in over a year, suggesting a slowing in the labour market after June's vote for Brexit. The numbers from the Office for National Statistics suggested a six-year expansion in the labour market may be ending, though wage growth accelerated modestly and a measure that excludes bonuses rose at its fastest since August 2015.

Davis said government would do all it could to make sure business gets the maximum access to the European Union's single market while minimising disruption to business in its talks with the bloc. He also did not rule out the possibility of a "transitional arrangement" to help businesses avoid a cliff edge after two years of talks.
 

Key Announcements

09.30 – GBP – Retail Sales Mom; Forecast at 0.2% against a previous of 1.9%

12.00 – GBP – MPC Official Bank Rates Votes

12.00 – GBP – Monetary Policy Summary

12.00 – GBP – Official bank rate; Forecast to stay the same at 0.25%

13.30 – USD – CPI MoM; Forecast at 0.2% against a previous of 0.4%

13.30 – USD – Core CPI MoM; Forecast at 0.2% against a previous of 0.1%

13.30 – USD – Philly Fed Manufacturing Index; Forecast at 9.1 against a previous of 7.6

13.30 – USD – Unemployment Claims