15/02/2017 - Yellen Hints At Rate Rise

USD

The Federal Reserve will likely need to raise interest rates at an upcoming meeting, Fed Chair Janet Yellen said on Tuesday, although she flagged considerable uncertainty over economic policy under the Trump administration. Yellen said delaying rate increases could leave the Fed's policymaking committee behind the curve and eventually lead it to hike rates quickly, which she said could cause a recession.

The Chair of the Fed cited "Waiting too long to remove accommodation would be unwise," Yellen said in prepared remarks before the U.S. Senate Banking Committee, citing the central bank's expectations the job market will tighten further and that inflation would rise to 2 percent.

"At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

Yellen did not say if Fed policymakers expected the economy would warrant three interest rate increases this year, as they last signalled in December.  Furthermore no indications were given whether the first rate hike of the year might come at its next meeting in March or at the subsequent June meeting, which is when most analysts expect a rate increase.

GBP

Sterling retreated from its highest level in a month against the euro on Tuesday, after UK inflation data came in below forecast, adding to a handful of subdued economic numbers over the past couple of weeks.

The figures still showed the fastest rise in consumer prices since June 2014, driven by higher fuel prices, but the headline 1.8 percent year-on-year reading was short of the 1.9 percent increase expected by economists. Below the headline numbers, other data showed the prices paid by factories for fuel and materials rose at an annual rate of 20.5 percent, the biggest leap since 2008 and underscoring the pressures currently building on UK firms.

It was seen as doing little to push the Bank of England towards an early rise in Britain's record low interest rates and knocked the pound which on Monday had notched its first unbroken six-day run of gains against the euro since early September. 

The political rumblings from Britain's looming divorce from the European Union also continued which kept UK government bonds under pressure. Speaking in Sweden, British Brexit minister David Davis said Britain would not, as some media reports have suggested in recent weeks, launch the formal EU exit procedure before the bloc's leaders holds a summit on March 9-10.

EUR

As concerns over Greece and its debt mount, Athens has reportedly decided to call in Rothschild, one of the oldest financial firms in the world, to navigate the country’s long-running creditor stand-off and avert default.

Greek authorities hope to finalize the appointment before crunch debt talks with eurozone finance ministers on February 20. The date has been described as the last chance for a bailout review with the upcoming elections in Europe likely to dominate the EU agenda.

Greece’s €323 billion debt is still the highest in the eurozone. According to the country’s Public Debt Management Agency, just €36 billion from that sum is owned by private investors who hold Greek bonds; the rest is in the hands of sector creditors such as the IMF and European institutions. The country has €7 billion of debt payments due this July, which it won’t be able to meet unless it receives new funds or carries out restructuring.

Key Announcements

13.30 – USD – CPI MoM; Forecast the same as previous at 0.3%

13.30 – USD – Core CPI MoM; Forecast the same as previous at 0.2%

13.30 – USD – Retail Sales MoM; Forecast at 0.1% against a previous of 0.6%

15.00 – USD – Fed Chair Yellen Testifies

15.30 – USD – Crude Oil Inventories