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September 2016

FOMC rates on hold – until December at least

Published: Thursday 22 September 2016

  • FOMC rates on hold – until December at least
  • RBNZ on hold but cuts likely
  • ECB and BOE in action today
It’s all about central banks this week.

The US Federal Reserve left their base rate on hold when they met yesterday. That was not quite what all analysts had in mind and the US Dollar weakened on the news. Share prices rose around the US and Asian markets. Those who had been predicting a rate hike have now shifted their focus to the December meeting for a rise in US rates and they may well be right; assuming nothing untoward happens in the meantime.

Late last night (UK time) the Reserve Bank of New Zealand also made a rate announcement and that was also a ‘no change’ one. However, the tone of their statement is still pointing towards further rate cuts. At 2.0%, the NZ base rate is still attractive enough to international investors to keep the NZD strong.

This morning, the BOE publishes the statement from the meeting they held on 20th September. That comes after the Paris-based Organisation for Economic Cooperation and Development OECD announced they had got it wrong on the effects of Brexit on the UK and revised their growth forecasts for the UK back upward. UK PLC has proven far more resilient than the forecasters and nay-sayers warned ahead of the referendum. In fact, other than the fall in the value of the Pound (a boon for British exporters and investors into the UK) the effects so far have been minimal. However, when negotiations to leave the EU begin in earnest, the impact may be more pronounced and that could be good or bad dependent on the success of the UK side in the negotiations.

The ECB publishes their economic bulletin this morning. This comes after German wage growth was reported to have slowed and after news of some bizarre risky lending by Greek banks. The economies of the EU and the Eurozone in particular are still in pretty dire straits whilst they berate the UK for the audacity of voting to leave the EU. The Euro remains surprisingly strong but the size of the Eurozone economy is a hefty incentive to hold Euros. We will get a speech from ECB president Draghi today as well.

That’s pretty well all the exciting news for the day. I will leave you with news that stuntman Eddie Braun has completed Evel Knievel’s ‘rocket across the Snake River Canyon’ jump 42 years after Knievel failed in his attempt. It’s quite nice to see this kind of thing but I am left wondering what it proves. Knievel’s motorcycle stunts were spectacular but surely men have gone much further in rockets than 1,400 feet across a canyon. The International Space Station is nearly 250 miles up. Surely that is a more impressive rocket ride.


Quote


My brother and I often laugh about how competitive we are. My laugh is cooler though.
 
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
USD 13:30 US: Unemployment claims 260k 261k
EUR 14:00 ECB President Draghi speaks    
USD 14:00 US: HPI m/m 0.2% 0.3%
EUR 15:00 EU: Consumer confidence -9 -8
USD 15:00 US: Existing home sales 5.39m 5.45m
USD 15:00 US: CB leading index m/m 0.4% 0.0%
GBP 18:00 BOE Gov Carney speaks    

Daily Currency Analysis by David Johnson



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