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September 2016

Fed’s Yellen – No fixed timetables for interest rate hike

Published: Thursday 29 September 2016

  • Fed’s Yellen – No fixed timetables for interest rate hike
  • Oil prices surge 5% on oil production deal
Oil prices continue to dominate the news as yesterday President of OPEC and Qatar's energy minister Mohammed Bin Saleh Al-Sada said after an informal meeting in Algeria that a preliminary deal was agreed to curb oil productions for the first time in eight years. OPEC production will be limited at 32.5m barrels per day, compared to current estimated output of 33.2m barrels per day. Oil surged 5% in response and is currently trading around $47 per barrel. This had a positive result on risk as we generally see the commodity currencies edge higher.  

Fed chair Janet Yellen says there is no "fixed timetable" for the next rate hike. But she noted that her preference is not to hold low interest rates for much longer as continuous job gains could overheat the economy. It seems clear that she is trying to prepare the market for hike in interest rates however the Federal Reserve are beginning to lose credibility by laying the groundwork and then not pulling the trigger. For now the Dollar remains range bound.

The German government and financial authorities are working on a rescue plan for Deutsche Bank in case it cannot pay fines in the US, according to Die Zeit newspaper. Germany's biggest lender is facing a $14bn bill for mis-selling mortgage-backed bonds before the financial crisis of 2008. In the worst-case scenario; the government would even take a 25% stake in the bank. In a quiet week of tier one data, any extra stresses on the Eurozone’s financial system should put the Euro into negative.

A subdued week on the European data front with today's highlight being German unemployment rate and Eurozone inflation data. This afternoon we await US final Q2 GDP, consumer spending and pending home sales.

One liners

When your only tool is a hammer, all problems start looking like nails

I don’t have solution, but I do admire the problem

Letting the cat out of the bag is a whole lot easier than putting it back in.

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Net lending to individuals m/m 3.8b 4.0b
GBP 09:30 UK: Mortgage approvals 61k 60k
USD 13:30 US: Final GDP q/q 1.1% 1.3%
USD 13:30 US: Unemployment claims 252k 260k
USD 13:30 US: Final GDP price index q/q 2.3% 2.3%
USD 13:30 US: Goods trade balance -58.8b -62.6b
USD 15:00 US: Pending home sales m/m 1.3% -0.1%

Daily Currency Analysis by Michael Hart

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