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November 2015

Daily Currency Insight

Published: Thursday 19 November 2015

  • Fed minutes signal a Dec rate hike
  • NZ PPI shows inflationary pressure building
  • Today’s focus UK retail sales at 09:30
The Federal Open Market Committee meeting minutes were published late yesterday. This insight into the thinking within the Federal Reserve is often about as exciting as cookery programs (or is that just me?). However, with the markets awash with views on when the US base rate is going to start rising, these meetings have taken on more significance and these minutes were quite interesting. Disagreement over the strength of the labour market, the robustness of the economic recovery and that does raise some doubt over the guarantee of a December interest rate hike. It may still happen of course and a 0.15% rate increase; which is what I suspect we would see, is perhaps not going to set a light under the US Dollar , especially if the Fed makes it clear that the pace of rate hikes is going to be veeeerrrry gradual.
 
We lacked data yesterday but Thursday will make up for it. We'll get UK retail sales data at 9.30 this morning and, whilst that is expected to show a dip after the end of the Rugby World Cup and as the weather changed, we still think the trend is an upward one. Sterling is in good form as we start the day.  At 11am we will get the CBI industrial trends survey and that is expected to be a tad less bad than last month; that'll be positive for Sterling if it is.
 
The New Zealand Dollar strengthened last night after the producer price index suggested inflationary pressure is on the rise. The Reserve Bank of New Zealand is caught between downward pressures from a slower Australian economy and dampened demand from China measured balanced against a strong housing market and inflation that would be a problem if the weak NZ Dollar wasn't slowing imports. We are unlikely to see any rate cuts based on this and other recent data but rate hikes are still a long way off as well.
 
At 12.30 pm we will get the minutes from the last ECB meeting. These are unlikely to yield anything we don't know about the Eurozone economy but they're worth a read. And it goes without saying that things have moved on apace since that meeting. The Paris attacks and the impact they will have on tourism is a great worry for the Eurozone as a whole and for France in particular. European unemployment is still appalling and growth is weaker than Jeremy Corbyn's labour party support. So there is very little chance of a rate hike from Europe and every chance of further rate cuts and broadening of the money supply. The euro is in retreat.
 
Can I finish with a request please? Can news reporters stop calling the organiser of the murderous attacks that befell Paris a 'mastermind'. Everything I have read about him is that he is a low-life petty criminal with a drug habit and a loathing for western culture. Getting murderers in place to kill unarmed innocents at the same time in a number of locations does not require a master-mind, just a total disregard for human life. 'Organiser' I can deal with, 'facilitator' also explains things but 'master mind'; that's just not appropriate.
 
 
Traffic report
 
A lorry has overturned on the motorway spilling 10,000 gallons of menthol extract onto the carriageway. Police say there is a huge traffic jam but no congestion for up to 6 hours.