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Fed talks interest hikes, US housing up

via Barclays

  • Yellen signals a December rate hike is imminent
  • US 30 year treasury yields break 3.00% whilst the USD gains
  • Barclays Research release latest FX forecasts

US 30-year treasury yields broke 3.00%, US 10-year treasury yields rose to 2.33%, US stocks rallied and the USD extended its gains, after Federal Reserve Chair Janet Yellen signaled that a Fed interest rate hike could be imminent

In her first public statement since the US election, Yellen signaled at a December Rate hike as she told lawmakers that the Fed is close to boosting borrowing costs as the economy continues to gain traction. Barclays Research expects the Fed to raise rates in December whilst markets are currently pricing c.90% probability

Markets appear to be sustaining another leg of the USD rally on expectations that Trump’s fiscal stimulus is likely to lift industries that are perceived to benefit from economic growth.

On the data front, US housing starts rose well above our and consensus expectations, with the data reaffirming Barclays Research’s view “…that steady improvement in the housing market is likely to continue over the next two years…” Meanwhile, US headline CPI inflation was in line with expectations in October increasing by 0.4% m/m.

Barclays Research have released their latest FX forecasts, influenced largely by the US election. They ”…cautiously assume a less negative outcome for both the EUR and EM, with USD appearing ‘great again,’ led by expectations for US fiscal stimulus and accelerated growth as a result…”

Currency rates today:

GBPUSD 1.2421

GBPEUR 1.1715

EURUSD 1.0603

GBPAUD 1.6815

EURGBP 0.8536

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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