29/09/16 - Odds on For December Fed Rate Hike 


Sterling dipped on Wednesday after a Bank of England policymaker said she expected the central bank would "at some point" need to add more monetary stimulus to Britain's economy to cushion the blow dealt by Brexit. BoE Deputy Governor Minouche Shafik - who will be stepping down from the bank's monetary policy committee next year - said a 2016 rate cut would hinge on economic data, but that she would rather act pre-emptively than "be on the back foot and do too little too late". Shafik's comments contrasted with those of fellow MPC member Kristin Forbes, who last week said she saw no case for a further rate cut.


The dollar edged higher against the yen and euro on Wednesday, but gains were limited as traders awaited more U.S. economic data for clues on whether the Federal Reserve will hike rates this year, while reduced concerns over the European banking system limited the euro's losses. Fed Chair Janet Yellen did not comment on the outlook for the economy or monetary policy in prepared testimony for a House of Representatives Financial Services Committee hearing.

Analysts said that, while traders were likely awaiting comments due later in the day from Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester, they were putting more focus on upcoming data like next week's U.S. September non-farm payrolls report. Mester and George would be watched closely since they were two of three unorthodox policymakers at the Fed's meeting last week who said they preferred an immediate hike rather than the deferral until later in the year that most saw as appropriate.

Investors on Wednesday saw a 52 percent probability that the Fed would hike rates at the U.S. central bank's December meeting, according to CME Group's FedWatch program.


Key Announcements

09.30 – EUR : German Unemployment Change; forecast at -5K against previous of -7k

13.30 – USD : Final GDP QoQ; 1.3% against previous of 1.1%

13.30 – USD : Unemployment Claims; forecast at 260k against a previous of 252k

21:00 – USD : Fed Chain Yellen Speaks at Minority Bankers Forum in Kansas City