22/11/2017 - FED To Continue Tightening Monetary Policy

USD

Speaking after a two-day FOMC policy meeting, Yellen said that the US central bank is still reasonably close to its goals and should continue to stick to its planned monetary tightening path in order to kerb inflation and unemployment. However she did not rule out the possibility of prices remaining low for years to come and said that any increases in interest rates are likely to be gradual.

Although prices have remained below the Feds 2% target for the past 5 years, unemployment has fallen to 4.1%. The US economy as a whole has also been posting strong growth of 3% which has further heightened expectations for a rate hike next month despite undershooting inflation.

GBP

The pound dominated against the euro following continued political uncertainty in Germany and fresh optimism surrounding the UK governments Brexit bill offer.

Data released yesterday also showed that public sector net borrowing increased by more than expected from £4.4 billion to £7.5 billion for the month of October. Analysts had originally forecast the figure to increase to £6.6 billion. This is likely to ease pressure on chancellor Philip Hammond as he juggles calls to boost spending in his budget later today in response to the recent slump in economic growth.

On Monday, May met with senior ministers amidst expectations that she will offer the EU more than she initially proposed during her speech in Florence in September which failed to break the deadlock in the negotiations.

However gains in sterling were somewhat limited as ministers painted a mixed picture despite reports that they agreed to make a larger offer. Some media outlets speculated that the bill could double to around 40 billion euros whilst others disputed that no specific figures were discussed.

Despite talks of May increasing the divorce offer, there are still concerns that even doubling the offer will fail to provide a meaningful breakthrough in the stalled talks. Some investors believe that regardless of May having the full backing of her cabinet, Brussels will require in excess of 60 billion euros.

Key Announcements

12:30 – GBP: Autumn Forecast Statement

13:30 – USD: Core Durable Goods Orders m/m; Forecast at 0.7% against a previous of 0.4%

13:30 – USD: Unemployment Claims; Forecast at 249K against a previous of 241K

15:30 – USD: Crude Oil Inventories

19:00 – USD: FOMC Meeting Minutes