FOMC Chair nominee Jerome Powell talks up US rate hike chances

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29 November 2017


The US Dollar rose for the second straight session against its major peers on Tuesday after the soon-to-be Chair of the Federal Reserve Jerome Powell talked up the chances of multiple interest rate hikes in the US in 2018.

owell, who is set to replace outgoing FOMC Chair Janet Yellen next year, said that conditions were supportive for an interest rate hike in December and that he thought gradual hikes would continue. He expects the US economy to grow by a respectable 2.5% this year and that a wide range of indicators suggest that the country is approaching full employment. With Powell seen as an almost like-for-like replacement for Yellen, we don’t believe his appointment will knock the Fed off course from raising rates on at least three occasions next year.

This afternoon we’ll have the release of an updated set of third quarter GDP numbers in the US, which are expected to show a modest upward revision to 3.2% annualised from the 3% preliminary estimate. In a hectic day of announcements, the PCE index could see a small bounce when released at 13:30 UK time. Current Chair of the Federal Reserve Janet Yellen will also be testifying at Congress this afternoon.

Pound recovers as UK-EU edge towards Brexit financial deal

Sterling slumped by almost one percent on Tuesday, although recovered all of its losses after London close to end the day higher against the US Dollar.

A deal on the Northern-Irish border, seen as an integral part of the Brexit negotiations, seemed in doubt yesterday, raising concerns over the possibility of a breakthrough in upcoming Brexit negotiations. However, the Pound rose sharply yesterday evening after it was reported the UK has offered a larger ‘divorce bill’ to the EU, of which could be worth up to 50 billion Euros.

Earlier in the session, Bank of England Governor Mark Carney spoke following the results of the bank’s latest stress tests. He claimed that UK banks could cope with a ‘disorderly’ Brexit, although he did strike an overall cautious tone over the EU exit process. Mark Carney will be making his second public appearance in as many days on Wednesday when he speaks at the Fair and Effective Markets Review Event in London at 14:00 UK time.

Euro edges lower ahead of German inflation release

In a day of very few economic data releases or news announcements in the Eurozone, the common currency held up relatively well against the Dollar yesterday, edging modestly lower. The Euro was instead driven by technical factors and events elsewhere.

This afternoon’s inflation data in Germany should give us a decent idea as to the strength of Thursday’s more critical Euro-wide inflation measure. The monthly consumer and business confidence indices this morning could also receive some attention when released.