Caution reigns as the US Federal Reserve (Fed) kick starts its 2-day monetary policy meeting today. The central bank is widely expected to lift the benchmark interest rate by a quarter of a percentage point at the meeting. If it turns out that way, this would be the first interest rate rise of 2016. However, market participants are more interested in the Fed Chairwoman, Janet Yellen’s speech and the central bank’s growth outlook, which will provide hints as to the chances of any further rate rise in 2017.
On the other side of the globe, both the UK and the Eurozone have high profile data releases scheduled today. Britain’s just out data showed that the nation’s consumer price index (CPI) rose in line with investor expectations for November. Meanwhile in the Eurozone, final reading of German consumer prices held steady in November. Looking ahead, investors await the Eurozone and German ZEW survey data, due in a few hours.
Pound Sterling – UK Markets
The Pound strengthened against its major peers this morning. This week's data packed UK economic calendar opens today with the nation’s inflation figures up for display. The just out data showed that British consumer prices rose in line with market expectations in November. Moreover, at the annual level, CPI jumped to a 2-year high.
Today’s inflation data will be followed by other top-tier economic releases such as Britain’s unemployment, wage growth and retail sales report, scheduled to be out during the latter half of this busy week. Apart from all this, market participants brace themselves for the Bank of England’s (BoE) monetary policy meeting this week. Although the central bank is widely expected to stand pat on interest rate and refrain from making any changes to its asset purchase facility, investors will closely scrutinise comments from the BoE Governor, Mark Carney to identify his viewpoint on the nation’s future economic outlook. Minutes of the meeting, to be released immediately afterwards, will also be instructive regarding the same.
US Dollar – US Markets
The US Dollar weakened against its major peers yesterday, with investors remaining cautious ahead of the outcome of tomorrow’s Fed monetary policy meeting. On the data front, the US monthly budget deficit widened more than expected in November, as government spending on health and other programmes increased, highlighting the growing mismatch between revenues and government spending. The monthly deficit was more than double the amount from the corresponding period last year.
The greenback is trading lower against the Pound and higher against the shared currency this morning. Market participants broadly expect that the US Fed would increase interest rate at its latest meeting, the first time this year and only the second since the global financial crisis. With a rate rise being largely priced in, investor focus has now turned to what signal the central bank will send on further policy tightening next year. Today, traders will focus on the US NFIB small business optimism index along with import and export price indices, all scheduled to be released later today.
Euro – European Markets
This morning, the Euro is trading in negative territory against the US Dollar and the Pound. Earlier in the session, data indicated that final reading of Germany’s annual CPI held steady at a 2-year high level, while the country’s harmonised index of consumer prices remained flat in November, despite the European Central Bank’s ongoing efforts to lift consumer price inflation in the Eurozone. Further, the nation’s wholesale prices registered a rise in November, advancing for the third consecutive month. In other economic news, Italy’s seasonally adjusted industrial output posted a less than anticipated improvement in November, while Spanish consumer prices topped market expectations during the same month.
Ahead in the session, the Eurozone and German ZEW economic sentiment survey data along with the region’s employment change data will be on traders’ radar. Looking forward in the week, market participants will keep an eye on manufacturing and services PMI data across the Eurozone region for further cues in the shared currency.
Other Currencies – Highlights
The Australian Dollar has reversed its previous session gains and is trading lower against the greenback this morning. Data released earlier in the session showed that Australia’s house price index advanced less than expected in 3Q 2016. Moreover, on an annual basis, the nation registered its weakest house price growth in over three years. Further, the Australian business conditions index dropped to its lowest level in 19 months, while the business confidence index rose in November. Meanwhile in China, Australia’s largest trading partner, industrial production advanced more than expected on an annual basis in November, adding to signs of recent strength in the world’s second largest economy. Moreover, the nation’s annual retail sales surpassed expectations during the same month to record its fastest rise since December last year.
Ahead in the week, traders will eye a few economic releases in Australia, namely, employment data and consumer inflation expectations along with the Reserve Bank of Australia’s bulletin report.