Yellen on Trump
Onwards and upwards
Although the US dollar only managed third place on Wednesday its trade-weighted value reached a 13-year high. Some say the dollar's strength casts doubt on a Federal Reserve rate increase next month: Most don't.
One argument against a rate hike is that the strengthening of the dollar already amounts to a form of monetary tightening. Another is that higher interest rates would bring in more dollar buyers, making US exports less competitive and further tightening policy. However, financial futures prices indicate a 93% chance of a rate increase on 14 December and senior Fed people, in their recent comments, have made no effort to change that expectation. (It is worth noting that in the immediate aftermath of the US election the odds fell below 50%.)
This afternoon Fed chairperson Janet Yellen will have the opportunity to cement rate hike expectations when she talks to the Joint Economic Committee of Congress about The Economic Outlook. Her toughest job, though, will be to dodge the inevitable questions about the likely impact of President Trump on inflation and the economy.
The most important economic data to have emerged in the last 24 hours related to employment in Britain and Australia. Neither set made any real difference to exchange rates even though both caused some disappointment.
The downward tick in UK unemployment from 4.9% to 4.8% was welcome enough but the 10k rise in jobseeker claims was not. Analysts' predictions that earnings growth would have accelerated from 2.3% to 2.4% came to naught. In Australia the 10k increase in employment was only half the forecast number but there was a swing back from part-time to full-time working and unemployment was steady at 5.6%.
The pound and the Aussie were unaltered by the numbers. Sterling is nearly a cent higher on the day against the Australian dollar but the move came during the morning and was unrelated to the data. It was all a bit random on the currency front yesterday. The Canadian and NZ dollars shared first place with the yen while the Aussie and the rand fought for the wooden spoon. Sterling was unchanged against the euro and the Swissy and it lost just under half a US cent.
Inflation all round
Three important sets of inflation data come out in the next 24 hours: Euroland and the United States report today and Canada tomorrow. There are retail sales figures from Britain and - network problems permitting - New Zealand.
Euro zone inflation is expected to come in at 0.3% while the US figure should be closer to target at 1.6% and Canada close by at 1.5%. UK retail sales are supposed to have risen by 0.4% in October after stalling in September. Statistics New Zealand is still trying to fix network problems caused by Monday's earthquake: it hopes to be back in the ecostat business tomorrow.
Janet Yellen speaks at three o'clock this afternoon. Her comments could be interesting on several levels.