Commodity Currencies Benefit as FOMC Officials Avoid Interest Rate Hints – 1st October 2015
October 1, 2015
William Dudley, the president of the New York Federal Reserve, was talking last night and kept investors in the dark about interest rate policy saying “it’s not for me to say what the market expectation should be”. Jim Bullard, the St Louis Fed president, and his boss Janet Yellen, the Federal Reserve chairperson, were also talking last night and neither were drawn on the matter of interest rate increases either.
Their lack of comment was in contrast to the chorus of remarks from the Federal Reserve leadership over the last fortnight pointing to higher US rates this year. Whether or not it represented a change of heart, economists predict there is only a 41% probability of a rate increase before Christmas now. Whatever happens in the future with US interest rates, it was a good day for commodity-related currencies yesterday.
The biggest loser yesterday was the Euro losing a cent to Sterling. The US Dollar strengthened against Sterling after the ADP’s US employment number showed the addition of 200,000 jobs in September, a bigger number than expected, but the Chicago purchasing managers’ index – the most important of all US PMI’s – was a disappointing 48.7.
Britain’s economy was confirmed to have grown by 0.7% in the second quarter of this year and, as expected, there were upward adjustments to the historic gross domestic product data. The news was initially positive for Sterling but in most cases it failed to hold onto its gains.
It being the first of the month, today’s agenda is dominated by the purchasing managers’ indices. The figures already announced this morning by Australia and China were only vaguely reassuring while analysts predict almost all of the readings from Europe and North America to be positive.
There is not much else of interest on today as we look towards the official US employment report tomorrow afternoon.