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Daily FX Update – 15th December 2016

So one of the most eagerly anticipated interest rate rises also turned out to be correctly projected by the market as the FED voted unanimously to raise the funds rate by 0.25bp; the second rise in 10 years. The initial surprise post the release was the dot plot forecasting a potential 3 rate increase in 2017, higher than the projected 2. The Dollar firmed post release but remained within ranges in anticipation of Yellen, partially likely to how priced in the move was but also because the FED had signalled 4 rate increases for this year and delivered one. Ranges however did break as Yellen essentially endorsed the dot plot and the Dollar surged.

As I’ve been mentioning for a while, all other things being equal, the Buck is likely to lead moving forward, not just in terms of monetary policy divergence, but the fact that macroeconomic fundamentals also remain buoyant. That being said, Yellen didn’t offer too much that we didn’t already know in the presser and Trump coming in next year could certainly add a new dynamic to the picture.

The data calendar remains busy today with European PMI’s kicking us off, followed by UK retail sales, the Bank of England interest rate announcement and US initial jobless claims.

Have a good day.

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