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April 2016

Fed unlikely to hike US interest rates in April

Published: Thursday 07 April 2016

  • Fed unlikely to hike US interest rates in April
  • Janet Yellen (Fed chair) to speak today 
  • Mario Draghi (ECB president) to speak today expect EUR volatility
The minutes from the Federal Reserve meeting in March showed that there were conflicting views within the committee around changing policy at this month's meeting. Several argued against hiking while some favoured for so it is most likely that interest rates will stay unchanged for the time being. The uncertain global economic landscape seem to be the most significant barrier to raising rates and as such it is difficult to see when that is likely to change. For now, rates will remain on hold and markets are now not expecting a hike in rates until the third quarter.
The South African Rand saw plenty of interest yesterday after ratings agency S&P downgraded growth forecasts for 2016 to 0.8% from 1.6%. They also noted that the current political situation was diverting attention from the focus on growth. A downgrade into junk status would be a challenge for South Africa and would certainly see the Rand continue to weaken. Manufacturing data is also due today and is expected contract by around 1%.
The focus today will be in Europe and the release of the minutes from the March meeting. We will get a clearer insight as to why they announced a fresh wave of stimulus measures and if they discarded any other ideas. Most are expecting a dovish ECB that are willing to do more to boost growth in the Eurozone and hopefully we will get some clarity on the factors policymakers are focussing on while expanding the banks stimulus programme. There are also plenty of ECB officials on the wires today including Mario Draghi later this afternoon so expect plenty of volatility in the single currency today.

Bad day

A group of bikers are sitting drinking in a bar. They have all noticed the little guy sitting at the counter looking sullen. He hasn’t touched his drink in 30 minutes when one of the bikers says, “He thinks he’s sad now. I’ll give him something to be sad about.” His mates all laugh as he gets up and walks over to the bar. He looks at the little guy in the eye as he grabs his drink and downs it in one.
With that, the little guy bursts into tears.
Even the burly biker is taken aback his sobs. “Don’t be a wimp mate. It’s just a drink. If you feel that bad, I’ll buy you another one.”
“You don’t understand,” says the small sad man. “This has been the worst day of my life. I overslept and was late for work. My boss fired me. When I went to drive home, my car had been stolen, so I took a taxi and then found my wife in bed with my best friend. I got angry and the dog attacked me. She called the police and it took three hours to sort all that out. She’s leaving me, my best friend is scum and I came to this bar to build up the courage to end my life and now I can’t even do that now. You’ve drunk the damned arsenic.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 11:30 E19: ECB minutes    
USD 12:30 US: Initial jobless claims, k (4wma) 276 265
CAD 12:30 Canada: Building permits, % m/m -9.8 4.7
USD 21:30 US: Fed chair Yellen speaks    

FX Research by Ricky Nelson

Daily Currency Analysis with Michael Condron

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