Are we there yet? Are we there yet? I can hear this question coming from all over the world in regards to the FOMC and Janet Yellen making a decision on a 2015 rate rise. We have waited with bated breath for many months now for a rate rise in the US for the first time since 2008.
After many months of disappointing data from the US which has continually delayed this announcement, the markets are pricing in a 70% chance of a rate rise in December. One of the key drivers behind a decision is the US inflation figures, with October’s results delivered overnight and coming in at 0.2%, slightly higher than the – 0.1% in September. We have seen the US Core CPI figures move slightly from 0.1% in June this year to 0.2% now, which leads many to believe that Yellen will continue to hold off while inflation is so low.
These figures along with a fall in commodity prices (Copper at a 6 year low & Iron ore dropping 4.5%) has seen the AUD/USD exchange rate drop as low as 0.7070 overnight, before bouncing back above the 0.71 mark, trading this morning at 0.7111.
Sterling was the other mover of the evening after the UK CPI figures were also released, again staying in the negative at -0.1 % for the second month in a row which has left the Sterling in the range moving as high as $2.1457 and as low as $2.1290
After last week’s double whammy of the BoE indicating that interest rates may not move in the UK until late 2016 at the earliest and the Australian unemployment figures being surprisingly strong, the GBP/AUD has really failed to break the $2.17 mark after so much hype around breaking $2.20 and beyond. Last night’s figures will now put pressure on the Sterling to try and reach those lofty heights again anytime soon.
The GBP/AUD exchange rate is trading at $2.1394 (0.4672) this morning.
The last big announcement overnight was the German ZEW Economic Sentiment, which came in at 10.4 which was higher than the expected 6.7 however has failed to strengthen the EUR after a few weeks of poor performance and continued talk of further rate cuts to come.
The AUD/EUR is trading this morning at 0.6679
Tonight, attention turns back to the US, Dennis Lockhart, President of the Reserve Bank of Atlanta speaks in New York, while US Building Permits are forecast to improve and the minutes from the FOMC meeting in October will be released and Janet will be hoping for good news on all fronts as she plans the best time to raise rates, then and only then will we see her Yellen from the rooftops.