020 7898 0500Overnight the US Federal Reserve Federal Open Market Committee (FOMC) increased interest rates by 25 basis points to 0.75%. This was as expected and already priced into the market. What was not forecast was the increase in expectation for three increases in interest rates in 2017 rather than the predicted two. The outcome was US dollar strength with gains across the board.
Earlier in the day the US retail sales posted an increase of 0.1% – the smallest increase in three months. This is in large down to household cutbacks on purchases of motor vehicles. This in turn suggest that we seeing a loss of momentum in economic growth in the fourth quarter.
Looking to the day ahead, the market will continue to be volatile as it continues to decipher the content from last night’s FOMC meeting. This is followed up by key inflation data, jobless claims and manufacturing from both Philadelphia and the Empire State. The inflation data is likely to be the most scrutinised, as it will be a key requirement for any future rate hikes.
