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USD: US rate hikes remain at the forefront of the market

By Michael Cooper February 10th, 2017

Following on from last week’s key unemployment data the market was keen to see if economic readings continued to remain optimistic. In terms of further readings on the employment sector, both the JOLTS (Job Openings and Labour Turnover Survey) and weekly jobless claims were solid once again. This helped the dollar gain some momentum as economists and analysts started to speculate that another interest rate could come sooner than expected. This view was strengthened by President Trump who announced he was going to weaken the Dodd-Frank bank regulation framework which forced US banks to maintain larger capital reserves. If these are lessened we could see US banks deploy these reserves, which in turn could be translated into inflation and thus bring a rate hike closer as other economic conditions look favourable.

Hitting the wires today we have the first reading of the University of Michigan consumer sentiment reading where confidence is expected to ebb slightly whilst remaining healthy. This is likely to be due to the transition of power in the US.

Next week is a busy week for US data. The calendar is crammed with key economic readings, which the market will be waiting for with baited breath as it continues to debate the next interest rate hike. Inflation, retail sales, manufacturing and housing data are all released but the key event will be the Federal Open Market Committee (FOMC) Chair Yellen’s semi-annual testimony before the Senate Banking Committee and House Financial Services Committee. These take place in Washington DC on Tuesday and Thursday respectively. The market will decipher these testimonies for clues on when the next interest rate hike is due.

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