us federal reserve

Fed raises rates, ECB in focus today

14th June 2018 Market Update

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?? GBP – The UK’s latest inflation rate defied expectations by remaining at 2.4%. Markets were expecting a rise to 2.6% on the back of oil prices being 40% higher than a year ago. The data followed the news on Tuesday where we saw an unexpected slowdown in wage growth suggesting that the Bank of England may well be deterred from raising interest rates anytime soon in the UK.

At 9.30am we see the release of UK retail sales which is expected to show an increase from 1.4% to 2.4% compared to a year ago, which could well give some appetite for the pound.

?? EUR – No major news out of the single bloc yesterday but the euro remained in demand ahead of today’s ECB monetary policy meeting.

Meeting in Riga, Mario Draghi and the Governing Council of the ECB are expected to discuss an end to its quantitative easing programme. Although it’s worth stating that the ECB may well take a cautious approach in doing so by merely changing the wording of the statement to suggest a change is coming.

?? USD – Dollar demand was somewhat subdued yesterday despite the Fed electing to raise interest rates to 2%.

Fed chair Jerome Powell also signalled that a further two hikes are expected this year, commenting “The decision you see today is another the US economy is in great shape”. “Growth is strong, labour markets are strong, inflation is close to target”.

Retails sales figures are due out in the afternoon expected to show a minor improvement for the month of May.

 

Key Announcements

?? GBP
09:30am: Retails Sales – Expected to increase to 2.4%

?? EUR
12:45pm: ECB Interest Rate Decision – Expected to remain at 0%
13:30pm: ECB Monetary Policy Statement

?? USD
13:30pm: Retail Sales – Expected to increase to 0.4%

 

Summary: As largely expected, the Federal Reserve elected to raise interest rates to 2% last night and UK inflation fell short of expectations coming in at 2.4% but the pound managed to remain resilient.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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