27/09/2017 - US FED Indicate December Rate Hike

USD

The Federal Reserve conceded it may have “misjudged” the strength of the labour market and the rate of inflation, leading to the possibility that  monetary policy ahead that will be easier than previously thought. Yellen's speech comes less than a week after the policymaking Federal Open Market Committee approved the first steps in unwinding some of the stimulus the Fed has provided since late-2008. The central bank will begin rolling off some of the bonds it holds on its $4.5 trillion balance sheet.

However the dollar gained overnight as Janet Yellen boosted expectation of an interest rate hike in December. Yellen stated that raising interest rates gradually is the right policy stance given current conditions in unemployment and unemployment. The nation’s unemployment rate currently stands at 4.4 percent, near what many economists believe to be full employment. One of the debates at the Federal Reserve is how much slack is left in the labour market before inflation will be sparked. The Fed has already raised interest rates twice this year.

EUR

The euro fell to its lowest level in a month on Tuesday as worry about political fallout in Germany and other euro zone countries grew. A speech by French President Emmanuel Macron, who has called for a fundamental overhaul of the European Union’s single currency zone and whose ideas include creating a euro zone budget and a euro zone finance minister, failed to stem outflows from the single currency, which plumbed its lows of the day as he spoke.

The results of Germany’s election, in which Merkel won a fourth term as Chancellor but saw her party with its worst showing since 1949, have forced Merkel to consider a new coalition, including the liberal Free Democrats (FDP) who are critical of Macron’s ideas on Europe.

GBP

Mortgage lending rose to its second highest level since April 2008 in August. The figures showed total gross lending rose to £24.2bn in August, up 6.4 per cent from last month. The figure is the highest since March 2016, when an impending hike to stamp duty on buy to let homes sent buyers into a frenzy, pushing transaction levels to a record high.

House purchase approvals from high-street banks also crept up to 41,807 in August, up 11pc on the same month last year, when the house market saw a post-referendum slump. Some attributed the rise in lending to buyers seeking to re-mortgage or first time buyers looking to get on the housing ladder before an anticipated first interest rise in more than a decade from the Bank of England this Autumn.

Key Announcements

13.30 – USD: Core Durable Goods Orders MoM; Forecast at 0.2% against a previous of 0.6%

15.30 – USD: Crude Oil Inventories