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US interest rates – more hike hints

Published: Friday 12 January 2018

  • More hints at US interest rate hike…
  • China’s trade surplus against USA at record high
By  David Johnson

More hints at US interest rate hike…
Another US Federal Reserve member has suggested three interest rate hikes in 2018 is a “reasonable starting point”, as he put it. The USD didn’t strengthen on the news, which would suggest the markets have already factored that in. The USD would have been weakened a tad by oil hitting $70 a barrel yesterday, but confidence is high in the US, as evidenced by the Dow Jones index hitting a new record high.  Interestingly, we are expecting this afternoon’s release of US inflation and retail sales data for December to weaken the USD because the forecasts are poor.  And, if US inflation does slip from 2.2% to 2.1% as the forecasts suggest, it damages the arguments for higher US interest rates.
China’s trade surplus with US reaches record high
Overnight we heard that China’s trade surplus with the US hit a record high in 2017, and that will strengthen the US President’s argument for sanctions against China to try to level the playing field. Good luck with that! In December 2017, China posted a $54.59 billion surplus on all trade and that was much greater than any forecasts. The stark contrast between China – with its massive surplus – and America – with its massive deficit – is impossible to avoid. I don’t think that has anything to do with the US president’s decision not to come to London for the new US Embassy’s opening. That seems to be a pouty dislike of the sale of the Grosvenor Square site, but we in Battersea will miss him… honest.
Uninspiring data today
This morning’s data is pretty lacklustre, I am sorry to say. We do get a smattering of inflation data from individual EU states, but the overall figure tends to move the market, not the member states’ data.
Key announcements expected next week for UK, Canada and China

And then it is the weekend, but next week brings UK inflation data, which is expected to stay above 3.1%; supporting the Pound, but that could be counterbalanced but December’s official retail sales data, which is not likely to show improvement on November. 
We are also very likely to get an interest rate hike from the Bank of Canada next week, which would inevitably strengthen the Canadian Dollar. In addition, we will most likely get strong Chinese growth data.
Like a Boss…
And here’s a good news story to send you into the weekend. Nataly Bonato, the owner of WeWork, an office cleaning company based in Sao Paulo, Brazil, was getting frustrated because the reports she had requested about the work being done were not coming in. Only half were being received and they were mostly incomplete or nonsensical. So she investigated and found that half of her staff were in fact illiterate. So, rather than getting upset, she teamed up with a school and gave staff longer lunch breaks two days a week to improve everyone’s literacy; they even had a graduation ceremony five months later. Good work, Nataly; Bossing like a Boss.
Age test

If you want to know if you are young or old, just fall over in front of a crowd. If they laugh and point and try to film you on their phones, you are still young. If they panic and start running to you and calling for an ambulance, you’re old. 

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD 13:30 US: Consumer Price Index 0.4% 0.1%
USD 13:30 US: Core Consumer Price Index 0.1% 0.2%
USD 13:30 US: Retail Sales 0.8% 0.4%
USD 13:30 US: Core Retail Sales 0.8% 0.4%
USD 15:00 US: Business Inventories -0.1% 0.4%

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