- Sterling flat after limp inflation data
- US Dollar poised for first US rate hike in 10 years
We heard yesterday that UK inflation picked up in November but barely into the growth area at an annualised 0.1%. Bank of England Governor Mark Carney spoke yesterday about a ‘low for long’ interest rate regime and shunned the idea of the BoE copying the Federal Reserve unless it was the right thing to do at the time. His comments were echoed by another BOE member, Sir Jon Cunliffe who said the rate hike progress will be “gradual” & “limited”. Sterling remains reasonably flat but there is scope for strength if this morning's UK unemployment data shows signs of improvement. What the BOE really wants to see is lower unemployment obviously but with improved wage growth. That is a leading indicator of potential inflation and retail growth and that would be a sign things are on the path to sustainable growth.
US inflation was in line with expectations when the data was released yesterday. It certainly didn't dampen the expectations of a US interest rate hike when the Federal Reserve makes its announcement at 19:00 GMT today. It is widely forecast that the US base rate will rise by 25 basis points but there is no unanimity over whether Janet Yellen will move the US away from the variable base rate they are currently sporting. If the rate hike appears to have been factored into the value of the US Dollar, the statement that follows the announcement is a more open book.
The pace of hikes, the time frame for each individual move and the conditions necessary for the Fed to hike again are all greyer areas than the expectation of this move today. Of course the Fed could choose to pause and delay the hike until the New Year but that would wrong-foot everyone and that isn't a good tactic for central bankers. They could move by less than the markets' expected 0.25% and I would have thought this would have been a good policy if they are not trying to alarm markets.
Whatever happens today, we will see significant volatility this evening after the UK markets are shut. Where the US Dollar starts tomorrow in the UK and Europe is an open debate but, assuming the Fed meets expectations, I suspect the US Dollar will remain roughly where it is after some pretty lively trading and volatility.
And they say a criminal always returns to the scene of the crime. Well that definitely happened in Rochester, Minnesota. A news reporter was doing a piece to camera live concerning a robbery that happened in the Sterling State Bank when one of the bank's employees ran into the street pointing at the robber. He appears to have returned to rob the place for the 2nd
day in a row. The reporter stopped the broadcast to call the police. The man was caught and arrested on a highway south of Minneapolis.
Bob and Gillian were starting to really worry about their 3 year old, Charlie. For some reason Charlie still hadn't spoken a word. They needed to start thinking about nurseries and were worried that maybe there was something medically wrong.
They had been discussing it before their evening meal but didn't talk about it in front of their son.
Then Charlie took a mouthful of peas and exclaimed, "Crikey mum, these peas are rock hard. I don't think they were cooked for long enough. Jamie Oliver says you should do them for at least 5 minutes from frozen."
His parents dropped their cutlery and sat there dumbstruck until his dad blurted out, "Wow.... Charlie you can talk.....and talk fluently..... in sentences. But how come you haven't said a word until now?"
Charlie smiled and said, "Never needed to Dad. Up until now everything has been just fine."