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CPI from both the UK and US ahead of Fed minutes
Yesterday saw the release of CPI data from both the UK and US, we had year on year CPI from the UK which met forecasts of -0.1% and core CPI marginally improved to 1.1%. This helped strengthen sterling against a number of its counterparts however its movements against the dollar were short-lived after US CPI data. US CPI was in line with expectations and helped underpin confidence that the Fed will move in December. This confidence has been bolstered by a number of Fed officials arguing that they feel the time is appropriate for the Fed to begin moving. Atlanta Fed Dennis Lockhart said it will soon be appropriate to raise rates given that global financial markets have stabilised since the August turmoil.
The latest Fed minutes will be released at 7 pm UK time with investors keen to find out the direction the Fed are going to take and what factors influenced their decision to hold back from tightening monetary policy. Markets are expecting to see a rate hike from the US in December and with data from the US keeping in line with expectations a move is looking more likely. Matt Weller, senior market analyst at FOREX.com commented, “Today’s minutes will help show whether the Fed’s hawkish shift was unanimous or merely a majority decision, which could help trader’s better handicap the likelihood of a December rate hike.” Following a strong jobs data the USD has weakened marginally against a basket of currencies ahead of this evening’s release. GBP/USD has moved back into the 1.52’s;
GBP/USD Exchange Rate
With a rate rise being all but priced in to the market for December, attention will now turn to how quickly the rate will rise at the consecutive meetings in the New Year. With inflation and the labour market continuing to be key barometers for the US, they will not want to tighten too quickly and force the Fed to take a backwards step. Following the minutes released today Thursday will see retails sales from the UK. Unemployment claims and Philly Fed manufacturing index from the US will be followed by speeches from FOMC members Lockhart and Fischer.
If you have an upcoming US dollar requirement then do not hesitate to get in contact with us here at the Foremost Currency Group.