Market News & Insights
17 August 2017

FOMC Minutes Sheds Dim Light on US Rate Hike

We start the day looking stateside and to last night’s FOMC minutes release. There was a clear message that policy makers see inflation softening and staying below the 2% target longer than expected. Most participants expected inflation to pick-up over the next couple of years and stabilise around the 2% target but members were concerned over the dip in inflation and continued to comment that the Committee could afford to be patient in deciding whether to increase interest rates further. In contrast, some members were concerned that delays in raising rates further could intensify financial stability risks. Several members noted that there had been an easing of financial conditions, although there were differing assessments of the likely implication. A couple of committee members were concerned that high equity prices could also pose risks to financial stability. In reality it’s the same rhetoric/argument for the last 18 months and the likelihood of a further rate increase this year (December) has certainly diminished. As far as starting to shrink the balance sheet is concerned, some committee members were prepared to announce a start date at the July meeting, although a majority preferred to defer that decision until an upcoming meeting.

This pushed EUR/USD beyond 1.1770 and targeting its next level of 1.1820 with further resistance levels of 1.1860 and 1.1910. On the support side we’re looking at 1.1770 and then 1.1690. On the GBP/USD front we’re looking at top side resistance at 1.2930 and then that key 1.30 level

Reports that President Draghi will not be making any new policy announcements during his Jackson Hole speech next week may have come as a disappointment for many hoping for a further Euro surge. An ECB spokesman said that Draghi will focus on the theme of the symposium and fostering a dynamic global economy, in his Aug. 25 remarks, while the sources added that he was keen to hold off on the policy discussion until the autumn, as agreed at the last rate-setting meeting in July.

Today on the calendar front we have UK Retail sales data out at 9.30 where we are anticipating a 0.1% month on month rise, reading down from a previous 0.9% as the summer months are normally thin retail wise it shouldn’t have too much of a bearing. In the Eurozone we have final CPI year on year which is forecast to come in at 1.3% and stateside we have unemployment claims out at 1.30 this afternoon.