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Weekly roundup: USD slips as latest data knocks odds of December interest rate hike

currency-newsWeekly roundup: USD slips as latest data knocks odds of December interest rate hike
US data started the week on a promising note, but releases towards the weekend saw the odds of an interest rate hike in December tumble, allowing the weakened pound to scrape some gains.

With a speech from US President Donald Trump on his proposed tax reforms due later in the week, markets were in little mood to buy the US dollar at the beginning of last week.

USD received a boost from the latest US data on Wednesday. The ADP employment change figure clocked in at 237,000 instead of printing in line with forecasts of 185,000. Although not proven, traders often work on the assumption that there is a correlation between the ADP figures and the much more influential non-farm payrolls report. Therefore a strong rise buoyed hopes of decent employment figures later in the week. US GDP also showed better than expected growth, clocking in at 3% year-on-year instead of 2.7% as predicted.

However, gains were softened by Donald Trump’s tax speech. His comments were largely devoid of new information, instead simply confirming the plan to cut corporation tax to 15% from the current level of 35%.
The personal consumption expenditure data on Thursday showed the slight slowdown in spending economists had expected. This pushed down odds of another interest rate hike this year from the Federal Reserve, who prefer to use expenditure data rather than CPI reports to gauge inflation.

Odds of a December rate hike slumped further after Friday’s US jobs data significantly disappointed. Not only was July’s job creation revised sharply lower to 189,000, but August’s figure clocked in at 156,000 instead of at the forecast 180,000. This pushed up the unemployment rate up to 4.4% against expectations. USD unsurprisingly dropped.

The ISM services/non-manufacturing composite index on Wednesday is the only top-tier release on the US data calendar this week, but there are plenty of speeches from Federal Reserve officials to keep USD volatile. Lael Brainard kicks off a packed schedule of policymaker talks tomorrow at 12.30, with further appearances by officials due throughout the week.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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