US prepares for liftoff, but we already have a man on the Space Station
Today could be the most anticipated Fed meeting of late -the markets are poised for a very possible first rate rise in 10 years. With so much expectation surrounding the hike, any lack of movement may actually cause more volatility for the Dollar across the board. The Greenback already started gaining strength notably against both the Pound and Euro yesterday, and confirmation of the hike this evening could see the Dollar gain more strength, possibly breaking 1.49 against the Pound.
It is to be noted that the tone of the statement will be key in terms of what indications are given as to the course of policy going into 2016, with a 25bps rise in rate expected at the very least. Expect the language to be non-controversial with adjectives like “gradual”, “measured” and “careful” with regards to further tightening moves. Likewise, Fed Chair Yellen is going to try and keep things low-key in her post-decision address.
Labour market data out today for the UK will determine some of the Pound’s movement this morning. Unemployment is estimated to stay steady at 5.3%, while the claimant count change is projected to show a 0.9K increase. Any uptick in employment should suggest a possible UK rate rise soon, but the lack of wage growth is likely to keep the Bank of England (BoE) cautious for now.
This morning Mark Carney has been reported as promising action to reduce risk in the buy-to-let property market in the event of a crash. In September, the Bank’s Financial Policy Committee (FPC) made a similar warning and the BoE found in its annual survey of household finances that almost a third of households would have to reduce spending, work more or alter their mortgage payments if rates rose by 2 percentage points without any increase in wages. Whilst it is clear the BoE is preparing for raising rates, it’s clear this will be no quick fix.
Data to watch: 8.30am German Markit Services, Manufacturing & Composite PMI. 9am Euro Markit Services, Manufacturing & Composite PMI. 9.30am UK Av Earnings with and without Bonus, ILO Unemployment Rate, Claimant Count Rate & Change. 10am Eur CPI month-on-month, year-on-year & Core (Nov), Trade Balance. 1.30pm US Housing Starts & Permits. 2.15pm US Industrial Production & Capacity Utilization. 2.45pm US Markit Manufacturing PMI. 7pm US Interest Rate Decision & FOMC Economic Projections. 7.30pm Fed Monetary Policy Statement & Press Conference.