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June 2016

Fed rate hikes on hold

Published: Tuesday 07 June 2016

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  • Fed rate hikes on hold
  • RBA – no cut and none in the pipeline

The Chairwoman of the US Federal Reserve, Janet Yellen, made a speech yesterday in which she seemed to dampen enthusiasm for an early interest rate hike from the Fed. I have to say that some reporters had an entirely different take on her comments but I've listened three times now and I can't see any hint of a June hike when Mrs Yellen says there is "considerable uncertainty about the economic outlook.” We may not see any movement in 2016 – in my humble opinion of course.
 
The Reserve Bank of Australia left their base rate on hold when they met overnight and made no obvious sign that they were planning a change in the 1.75% base rate any time soon. Australian data has been mixed but marginally positive lately and that has curtailed calls for rate cuts.  The Aussie Dollar strengthened on the news.
 
None of this explains the very volatile trading we saw overnight, which many are attributing to either a fat fingered trader or some sizable speculative trades going through the markets but the Pound has been bounced around like a circus acrobat. Sterling's general direction of travel ought to be a weakening one but traders are struggling with the likelihood of an EU exit vote and, even though the Leave campaign appears to be gathering pace, they perhaps can't quite believe it will happen. Many in the markets believe the shock and awe tactics being adopted by the Remain campaign are backfiring and news that some Remain campaigners would seek to challenge the referendum result if they lose is seen variously as an affront to democracy and an insult to the British public. It's getting nasty now. I can't imagine the Cameron v Farage debate tonight will calm things down.
 
Today brings the final economic growth data for the Eurozone and a quarterly growth rate of 0.5% is likely to be confirmed. The rest of the day is light on data but that won't stop the debate over US interest rates, comments about the EU/UK situation or anything else that could impact exchange rates.
 
And I must have missed it but yesterday, being the sixth of the sixth 2016 was, according to writer David Montaigne, the day the Anti-Christ would appear. If you spotted Beelzebub yesterday, could you let the rest of us know please, so we can stay away. Thanks. But if the three sizes are the sign of the beast, surely 06/06/2006 would be more appropriate or maybe 06/06/666 but maybe calendars weren't as accurate then and it wouldn't be fitting for the lord of darkness to arrive unannounced. Or maybe I am taking this far too seriously. 
 

Advice

 
A teacher sees a small boy making faces at the girls in the playground. She goes over to stop him and says, "You know, my mother always told me that if you make a face and the wind changes, you'll be stuck like that forever."
 
The boy turns to her and says, "Well Miss, you can't say you weren't warned."
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
EUR 10:00 EU: Revised GDP q/q 0.5 0.5
USD 13:00 US: Revised nonfarm productivity  -1.0 -0.6
CAD 15:00 Canada: Ivey PMI 53.1 54.2
NZD 23:45 New Zealand: Manufacturing sales q/q -1.9 -1.9

Daily Currency Insight by David Johnson

Daily Currency Analysis with Charlie Horsley

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