- Federal farewell for Janet Yellen
- Pound remains strong despite Brexit discussions
By Killian Greenwood
Federal farewell for Janet Yellen
Overnight we saw the US Federal Open Market Committee (FOMC) rate decision and Janet Yellen’s final meeting as Federal Reserve Chair. As expected, the Federal funds rate was unchanged at 1.25-1.5%. The accompanying message continues to suggest that the gradual removal of monetary stimulus remains on track. Policymakers have eventually taken out the impacts of hurricanes in their economic forecasts and continued to see solid growth in employment, household spending and business fixed investment. Meanwhile, they acknowledged that core inflation has stopped declining, thus allowing them to maintain the view that inflation would strengthen this year and then stabilise around their 2% target. The US Dollar has managed to make up a little ground as a result – markets are watching and waiting to see if this improvement in the US Dollar’s fortunes will last.
Pound remains strong despite Brexit discussions
EU Brexit negotiators have set out a tough line on financial services, ruling out an ambitious trade deal for the lucrative sector and arguing that Europe would benefit from a smaller City of London, according to confidential discussions among the other 27 member states. In a rebuff to the UK, which is aiming to put financial services at the heart of a trade deal with the EU, an internal EU27 meeting this week concluded that future arrangements should be based on “equivalence” — the limited and revocable access given to third-country institutions — rather than a wide-ranging new pact. At present, such provisions give financial groups from countries such as the US conditional access to the Single Market for some services. “There was a strong commission message that there would be no special deal,” said an EU diplomat briefed on the discussions — a first attempt to thrash out the bloc’s position on the issue before negotiations with Britain start in March. “The UK is being told from the beginning what the situation is.” Despite this, the British Pound is hovering above 1.4240 against the US Dollar and 1.1440 versus the Euro.
What to look out for today…
In terms of data releases, this afternoon will see UK and European Manufacturing Purchasing Managers’ Indices (PMI) this morning, followed by Canadian Manufacturing PMI at 2:30pm, and a raft of US data, including the eagerly awaited US Institute for Supply Management (ISM) for manufacturing and for employment at 3:00pm UK time.