The FOMC raised rates by 0.25 bps yesterday evening to a 1.75% to 2.00% target range in a hawkish move and reaffirmed its expected forecast of 2 more hikes in 2018 and 3 in 2019. The move had been fully anticipated by markets and so did not come as a big surprise. The committee cited a solid growth outlook and greater confidence that inflation is converging on target as supporting their decision. The End of year GDP forecast was raised to 2.8% from 2.7% and the FED is strongly committed to the 2% inflation target. The USD reacted by strengthening against other currencies but this moved was faded with the USD now weaker against EUR, GBP and JPY than when the rate decision was announced. US stocks initially moved higher but again the move was faded and they closed in the red.
UK Consumer Price Index (May) was 0.4% (MoM) and 2.4% (YoY) against an expected 0.4% (MoM) and 2.5% (YoY) from 0.4% (MoM) and 2.4% (YoY) previously. Core Consumer Price Index (YoY) (May) was 2.1% against an expected 2.1% from 2.1% prior. Producer Price Index – Input (May) was 2.8% (MoM) and 9.2% (YoY) against an expected 1.6% (MoM) and 7.6% (YoY) from 0.6% (MoM) and 5.6% (YoY) previously. Retail Price Index (May) was 0.4% (MoM) and 3.3% (YoY) against an expected 0.4% (MoM) and 3.4% (YoY) from 0.5% (MoM) and 3.4% (YoY) previously.
These data points showed CPI holding steady, with the yearly number above the Bank of England’s 2% target since March of 2017 due to the change in the value of the pound after Brexit. Producer Prices have continued to increase with big beats against the expected numbers. GBPUSD moved lower from 1.33349 to 1.33110 after this data was released.
Eurozone Industrial Production (Apr) was released at -0.9% (MoM) and 1.7% (YoY) against the consensus for -0.5% (MoM) and 2.8% (YoY) from a prior of 0.5% (MoM) and 3.0% (YoY). This data extended its decline with the monthly figure slipping back under zero after rising last month.
US Producer Price Index ex Food and Energy (YoY) (May) was 2.4% against an expected 2.3% from a previous reading of 2.3%. This data beat the expected number by 0.1% this month. EURUSD moved higher from 1.17584 to 1.17816 after this data release.
EURUSD is up 0.09% overnight, trading around 1.18020.
USDJPY is down -0.23% in the early session, trading at around 110.080
GBPUSD is up 0.11% this morning trading around 1.33896
Gold is flat in early morning trading at around $1,299.30
WTI is down -0.14% this morning, trading around $66.44