16/02/2017 - Economists Speculate on Fed Rate Hike

USD

The Dollar strengthened yesterday afternoon with economists speculating about the potential for an earlier-than-expected Fed interest rate hike after consumer spending and inflation data shifted into a higher gear in January.

On Tuesday Fed Chair Janet Yellen pushed up the odds of a March hike with hawkish comments during Congressional testimony, but the strength of Wednesday's retail sales and better than forecast CPI inflation data nudged the potential even higher. This caused a major US bank to change their forecast for a June rate hike to May based on those two economic reports.

The consumer price index, gave its biggest monthly gain in four years after jumping to 0.6 percent in January. Inflation had been creeping higher, but the pace is clearly accelerating. Retail sales also were higher than expected, despite vehicle sales showing the biggest drop in 10 months due to a pickup in department store sales. 

GBP

The Pound started poorly in the morning session after wage growth for British workers slowed as inflation pushed down real earnings to their slowest increase since December 2014.

The office for national statistics revealed that average weekly earnings grew by 2.6 per cent in the year to December before inflation is taken into account; however the increased living costs means real growth was only 1.4 per cent over the year.

Key Announcements

13:30 – USD : Building Permits is forecast to increase to 1.23M

13:30 – USD : Philly Fed Manufacturing Index

13:30 – USD : Unemployment Claims is expected to increase to 243k