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June 2017

Federal Reserve raises rates by further 0.25%

Published: Thursday 15 June 2017

  • Federal Reserve raises rates by further 0.25%
  • Markets await Bank of England (BoE) rate decision
  • Australia Unemployment unexpectedly falls to 5.5%
By Michael Hart
The Dollar weakened on lower than expected retail sales and Inflation data, but then recovered following the Federal Open Market Committee (FOMC) meeting after the Federal Reserve delivered their widely expected rate hike. In the statement accompanying the rate hike, Federal Reserve Chairwoman Janet Yellen noted the recent slowing of inflation and said that they would be monitoring developments closely. She also stated that they would look through the temporary factors that are currently influencing the inflation rate. The Federal Reserve still expects to raise rates at least once more this year. While the US Dollar was lifted, it's clearly not out of the woods yet, as markets seem not fully convinced by what the Federal Reserve said; hence the fairly limited rally in the Dollar.

The Australian Unemployment rate unexpectedly dropped to 5.5% in May, down from 5.7% and below expectations of 5.7%. That was also the lowest number since February 2013. The headline job number showed 42k growth, well above expectations of 10k. Speculations of a rate cut by the Reserve Bank of Australia (RBA) receded after the release and the AUD rallied a little.

On the other hand, New Zealand Gross Domestic Product (GDP) grew only 0.5% quarter-on-quarter in Q1, below expectations of 0.7% quarter-on-quarter. While the NZ Dollar remains the second strongest major currency for the month, it took a little tumble overnight.

The Bank of England (BoE) rate decision is the key event to watch in European session. The BoE is widely expected to keep the bank rate unchanged at 0.25% and asset purchase target at GBP 435 billion. Attention will be on voting, but after the upside inflation surprise earlier this week, Kristin Forbes will likely continue to vote for a hike. However, like many other central bank announcements, it could turn out to be non-event.

UK Retail Sales and Eurozone Trade Balance are the main other data releases of note.

Quick fire jokes

Why can’t you trust an atom?
Because they make up everything.

Why did the golfer wear two pairs of pants?
In case he got a hole in one.

What do you call a polar bear in the jungle?
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