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The US dollar will finish the week ending May 12 higher across the board against major pairs. Despite the dollar rally losing steam as softer economic data was released the U.S. Federal Reserve kept the June rate hike on the table boosting the greenback on a monetary policy divergence basis. The central banks of New Zealand and England issued statements this week and made it clear that there are no rate changes coming soon, unlike the US central bank. The miss in inflation and sales could only highlight a temporary problem as the May 7 U.S. non farm payrolls (NFP) added 211,000 jobs still points to a solid recovery.
The market is pricing in a 73.8 percent probability that when it meets on June 14 it will raise interest rates to a 100-125 basis points range. Weaker US data has brought it down from 83.1 percent yesterday but taking Fedspeak into consideration it remains a firm possibility. Federal Open Market Committee (FOMC) members have seen the number of speeches they deliver increase which better prepares the market for upcoming decisions. The FOMC meeting in March was a great example as Fed members warned investors that they were not pricing in an upcoming rate hike. The meeting in June become a test of trust. The Fed has been typically vague in their timing but is now dropping far more hints without resorting to outright guidance.
The week of May 15 to May 19 will feature little in the way of economic events. The market will focus on data out of the UK, with UK inflation to be released on Tuesday, May 16 at 4:30 am EDT and retail sales on Thursday, May 18 at 4:30 am EDT. The Bank of England (BoE) kept rates unchanged last week and the central bank issued a warning of the lack of wage growth as inflation is rising to a forecasted 2.8 percent in 2017. The BoE also reduced economic growth forecasts to 1.9 percent as the pound has been weaker ahead of Brexit.
The market is pricing in a 73.8 percent probability that when it meets on June 14 it will raise interest rates to a 100-125 basis points range. Weaker US data has brought it down from 83.1 percent yesterday but taking Fedspeak into consideration it remains a firm possibility. Federal Open Market Committee (FOMC) members have seen the number of speeches they deliver increase which better prepares the market for upcoming decisions. The FOMC meeting in March was a great example as Fed members warned investors that they were not pricing in an upcoming rate hike. The meeting in June become a test of trust. The Fed has been typically vague in their timing but is now dropping far more hints without resorting to outright guidance.
The week of May 15 to May 19 will feature little in the way of economic events. The market will focus on data out of the UK, with UK inflation to be released on Tuesday, May 16 at 4:30 am EDT and retail sales on Thursday, May 18 at 4:30 am EDT. The Bank of England (BoE) kept rates unchanged last week and the central bank issued a warning of the lack of wage growth as inflation is rising to a forecasted 2.8 percent in 2017. The BoE also reduced economic growth forecasts to 1.9 percent as the pound has been weaker ahead of Brexit.
