14 Dec: Fed hike by 25bp. US$ falls, metals rally. Australian jobs, China Retail Sales, then ECB, SNB & BOE Meetings

By | December 14, 2017

 

The Fed have raised rates by 25bp to 1.5%, as widely expected, but left its interest rate outlook for the coming years unchanged given that inflation is unable to rise, even as policymakers project a short-term acceleration in U.S. economic growth. While employment is expected to remain robust, projected to fall to 3.9% in 2018, inflation is projected to remain below the Fed’s 2% goal for another year, causing enough concern for the Fed to see no reason to accelerate the expected pace of rate hikes.

In her final statement, Janet Yellen noted that future changes in tax policy will likely provide some lift in economic growth although the magnitude and timing of this remain uncertain. She also remained confident of a robust labor market but noted that inflation remain soft while suggesting that it will reach the 2% target over time and that gradual rate hikes will be warranted.

Earlier in the US session, the dollar had been under pressure after the Q3 CPI showed sluggish inflation, adding to concerns the Fed may be less able to execute multiple rate increases in 2018. Excluding food and energy, consumer prices ticked up 0.1%in November, with the annual increase in the Core CPI slowing to 1.7% in November from 1.8% in October. Headline CPI rose 0.4% mm, 2.2% yy in November, in line with consensus.

Late in the day, the UK Government has lost a vote on the Brexit blueprint, giving lawmakers the final say on Brexit. Cable was largely unmoved.

The overall outcome has been a swift selloff of the US$ after Janet Yellen’s statement while stocks at present are largely unmoved at all time highs. The metals have moved higher, in line with the $ weakness, while WTI remains heavy following the EIA Crude Oil Stocks Weekly Change  showing that crude stockpiles fell for the second straight week but failed to offset a larger-than-expected build in gasoline supplies.

It is going to be a bid day for data on Thursday starting with the Aud$ where the Australian Consumer Inflation Expectation and Unemployment (exp +18K, 5.4%) will be in focus ahead of the China Retail Sales (exp 10.2%yy), Industrial Production (exp 6.0%yy) and Fixed Asset Investment (exp 7.2%yy). Not to be left out, Japan has the Oct Industrial Production/Capacity Utilisation and the weekly Foreign Bond/Stocks Investment.  Europe then warms up with the flash Mfg PMIs and the UK Retail Sales (exp 0.4%mm, 0.3%yy), coming ahead of the SNB, BOE  and ECB Interest Rate Decisions. Although no change is expected from any of them, the relative statements/press conferences will be closely watched. The US will be busy too, starting with the November Retail Sales (exp 0.3%), weekly Jobless Claims, Import/Export Index, Business Inventories and the flash Manufacturing/Services/Composite PMIs. Also note that the EIA Crude Oil Stocks Weekly Change will be released late in the day.

CURRENCIES
EURUSD: 1.1816
Res  1.1825  1.1865  1.1905
Sup  1.1780  1.1750  1.1715
USDJPY: 112.60
Res  112.90  113.35  113.75
Sup  112.45  112.00  111.65
GBPUSD: 1.3410
Res  1.3430  1.3480  1.3520
Sup  1.3375  1.3305  1.3220
USDCHF: 0.9853
Res  0.9870  0.9890  0.9915
Sup  0.9840  0.9820  0.9795
AUDUSD: 0.7628
Res  0.7640  0.7655  0.7680
Sup  0.7605  0.7580  0.7545
NZDUSD: 0.7019
Res  0.7030  0.7055  0.7080
Sup  0.7000  0.6980  0.6950
INDICES / COMMODITIES
S&P: 2672
Res  2675  2680  2685
Sup  2665  2660  2655
DJI: 24650
Res  24690  24850  25000
Sup  24575  24480  24390
ASX SPI: 6057
Res  6065  6080  6100
Sup  6045  6025  6005
XAUUSD: 1255
Res  1260  1265  1270
Sup  1250  1245  1240
XAGUSD: 16.04
Res  16.15  16.30  16.45
Sup  15.85  15.70  15.55
WTI: 56.67
Res  56.95  57.35  57.80
Sup  56.50  56.10  55.80