Last Fed Open Market Committee minutes before US Rate Hike?
Core US inflation turned positive today as the Consumer Price Index ticked up to 0.2%, Core Inflation (excluding food and automobiles) remains at a healthy 1.9% which is almost in line with the target of the Federal Reserve, raising the likelihood of an interest rate hike in December.
Elsewhere, production figures failed to ignite any excitement as Industrial Production slowed again to -0.2% in October, the same result as in August and September.
Looking at price action and taking a broader view – from a Dollar perspective, EUR/USD reached a new monthly high today, bringing gains in the last month to around 7.6%. The gains versus Sterling are way short of that but still significant, at the highest point, the Greenback has managed to wipe 3.1% from the value of the Pound. These figures give clear signs as to what currency has the momentum over the long term.
Today could provide a lot of volatility as we see the release of the FOMC minutes at 7pm, this is likely to be the main event. Preceding that though, we will see the results of the building permits and house building data. We don’t expect to see too much price action here though.
In the Eurozone, the German ZEW survey results rebounded in November after seven consecutive falls thanks to resilient economic data from Europe’s top economy, however it was the opposite for the Eurozone as a whole. The Survey allows for up to 350 analysts and experts to participate via their opinions concerning the current and future economic state of Germany and Europe as a whole. Greece have secured a deal on the next portion of bailout cash. Another €2bn (£1.4bn) in loans and up to €10bn in support for the banks will be released after agreeing a batch of reforms that will be presented to the Greek Parliament on Thursday.
UK CPI came out marginally better than the market estimated yesterday morning with a reading of 1.1% up from 1.0%, but it did little to swing the rate against the dollar. There was enough momentum to reach 1.5200, but the rest of the day was then held in that range. Against the Euro, Sterling had slightly more of an impact steadily gaining ground and peaking just past 1.4300. However the accompanying data releases out including Core PPI, were down to -0.1 from 0.1 and Retail Price index YoY also down from 0.8 to 0.7% kept any real rally pared back. This mixed bag of data is enough to keep the BoE from hiking rates anytime soon.
Data to watch: 1.30pm US Housing Starts & Building Permits, 7pm US Fed Open Market Committee minutes