USD
Federal Reserve Chairwoman Janet Yellen on Thursday said the U.S. labour market
had moved demonstrably closer to a more normal state, a reason why the central
bank is likely to raise short-term interest rates later this year. Ms. Yellen
again avoided specifying exactly when the Fed is likely to start lifting its
benchmark rate from near zero. Most of the U.S. central bank’s policy makers
have said they expect to start raising the rate this year if the economy

USD
Federal Reserve Chairwoman Janet Yellen on Thursday said the U.S. labour market
had moved demonstrably closer to a more normal state, a reason why the central
bank is likely to raise short-term interest rates later this year. Ms. Yellen
again avoided specifying exactly when the Fed is likely to start lifting its
benchmark rate from near zero. Most of the U.S. central bank’s policy makers
have said they expect to start raising the rate this year if the economy
continues to strengthen as they forecast, and many private economists consider
September the likely time for a rate rise.

Ms. Yellen highlighted improvement in the labour market and the broader economy
as reasons why the Fed is likely to raise rates in the months ahead. 

While wage growth has been sluggish for years, the Labour Department’s
employment-cost index, has seen a “meaningful pick-up” in the past year. “I
would expect to see some further upward movement” in wage growth going forward,
she said, while cautioning that “where they can go depends in part on
productivity growth.” To address slow productivity growth, Ms. Yellen gave
Congress a to-do list, suggesting policies to improve education and
entrepreneurship as well as increasing capital investment, both public and
private.

EUR
The eurozone’s inflation rate dipped slightly from 0.3% in May to 0.2% in June.
This reading marks the second month of a return to inflation after five months
of flat or falling prices. The rise in prices was due in part to an increase in
food and beverage costs, which were 1.2% higher.

In March, the ECB began a €1 trillion stimulus programme to boost economic
activity in the Eurozone and this policy may now be beginning to have a
positive impact on inflation.

Mario Draghi announced that the ECB had raised its Emergency Liquidity
Assistance to Greek banks for the first time since late June, by €900 million.
Mr. Draghi said the amount was as advised by the Bank of Greece. It’s a move
that could lead to a reopening of the banks in coming days, but the return to
normality will take much longer. Also Mr Draghi said recovery is “broadening”
but it is still less than satisfactory. 

GBP
Bank of England governor Mark Carney has indicated that UK interest rates could
rise “at the turn of this year”. In a speech at Lincoln Cathedral he
said that he expected rates to rise over the next three years, reaching
“about half as high as historical averages”, or about 2%.

However he added that shocks to the economy could change the timing and the
size of any rate rise. Interest rates have been at 0.5% for six years as the UK
economy recovers from the financial crisis. Carney stated that “Short term
interest rates have averaged around 4.5% since around the Bank’s inception
three centuries ago.

 Key Announcements

13:30 – USD: US Consumer Price index (YOY) June
expected to be higher at 1.8% from 1.7%