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Rate Rise on The Cards as the FOMC Meets Today

  • December 14th, 2016
  • Author: Simon Birch
Rate Rise on The Cards as the FOMC Meets Today

The two-day Federal Open Market Committee (FOMC) meeting is all set to conclude today and the US central bank is expected to raise the benchmark interest rate by a quarter of a percentage point after it last increased the rate in December of 2015. With the rate increase already priced in by the markets, investors will be interested to know the central bank’s future position for rate increases in 2017. Moreover, the US economic docket today features the release of monthly retail sales industrial production data.

The just out data from the UK’s ILO unemployment rate remained steady during the three months ended October, while the nation’s employment surprisingly eased during the same period. Moving to the Euro region, the French consumer price index remained steady on a monthly basis in November. Going ahead, investors will keep a track of the Eurozone’s industrial production data for October.

Pound Sterling – UK Markets

The Pound is trading higher against the greenback and the shared currency this morning. Today’s fresh batch of data releases from the UK showed that the nation’s ILO unemployment rate remained steady at 4.8% during the three months to October, while the number of people at work unexpectedly declined during the same period. Meanwhile, the nation’s average weekly earnings advanced more than market expectations in the three months ended October. Separately, the number of people claiming jobless benefits registered a smaller rise than expected in November. Going forward, the Bank of England (BoE) Governor, Mark Carney, is scheduled to speak today.

Yesterday, the Sterling ended lower against the US Dollar after registering an initial rise, following the British Chancellor Philip Hammond’s call for a transitional deal of Britain’s exit from the European Union. Moreover, the nation’s annual inflation notched its highest level since October 2014, amid a rise in clothing and petrol prices.

US Dollar – US Markets

The US Dollar is trading lower against the Pound and higher against the shared currency this morning, with investors remaining cautious ahead of the outcome of the Fed’s monetary policy meeting later in the day. Market participants are under the impression that a rate rise is certain at this meeting. The US central bank will also announce updated economic forecasts and traders will be keenly watching for signals on the outlook for inflation and the estimated pace of rate rise next year. Today on the US data front, investors will focus on advance retail sales and industrial production data, scheduled to release later in the day.

Yesterday, the greenback ended higher against most of its major peers. On the data front, the US NFIB small business optimism index rose more than expected in November, its strongest increase since 2009, on optimism that the US President-elect, Donald Trump's administration will spur an increase in the nation’s business activity. Meanwhile, the nation’s import prices recorded its largest drop since February, amid a decline in petroleum cost.

Euro – European Markets

This morning, the Euro is trading lower against the US Dollar and the Pound. Earlier in the session, data indicated that the final reading of French EU normalised consumer inflation prices remained unchanged in November. The stability resulted from a lower rise in energy prices and a moderate recovery in food prices, which was countered by a decline in services and manufactured product prices. Going ahead, market participants await the Eurozone’s seasonally adjusted industrial output data, set to release in some time and is expected to rebound in October from the previous month.

Yesterday, the shared currency ended weaker against the US Dollar. Data showed that the number of people employed in the Eurozone rose at a slower pace during the third quarter compared to that of the previous quarter. However, the Euro region’s ZEW Indicator of Economic Sentiment surpassed investor expectations in December while that for Germany remained steady in the same month. In other economic news, the German current situation index strengthened in December.

Other Currencies – Highlights

The Japanese Yen is trading in positive territory against the US Dollar this morning. A string of Japanese economic releases crossed the wires earlier in the session. The Bank of Japan’s closely watched quarterly Tankan survey showed that Japan’s large manufacturing index advanced in the fourth quarter of 2016, in line with market expectations and its first improvement in six quarters. This, breathed new life into a nation that is trying hard to escape deflation. Meanwhile, the nation’s Tankan non-manufacturing index remained unchanged in the fourth quarter of 2016.

In other economic news, the final figures from Japan’s Ministry of Economy, Trade and Industry showed that the nation’s industrial production came in flat on a monthly basis in October, instead of a rise indicated in preliminary estimates. On an annual basis, industrial production declined in October, reversing its climb in the prior month. Moving ahead, investors would focus on Japan’s flash Nikkei manufacturing PMI, due to release overnight.

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