US raises interest rates – 15th June 2017

 

US raises interest rates – 15th June 2017

Immediately ahead of London’s opening yesterday Sterling moved higher across the board for no obvious reason and managed to hold onto these gains until just before the ONS published the UK employment data.  On the plus side, the 7,300 increase in jobseeker numbers was less than expected and unemployment remained at 4.6%.  However, the already weak growth in total earnings slowed from a downwardly-revised 2.3% to 2.1%.  Retail prices (RPI) were up by 3.5% over the same period.  So, prices up and wages down – not good signs for the UK.

The US Dollar’s fate yesterday was in the hands of the Federal Reserve who confirmed that it was raising interest rates by 0.25% from 1.0% to 1.25% and the US Dollar strengthened.

The Australian Dollar also prospered as a result of strong employment data while the NZ Dollar lost ground following figures that showed the NZ economy growing more slowly than expected in the first quarter. In many countries quarterly growth of 0.5% would be welcomed with open arms.  For New Zealand, however, it came as a disappointment to investors who had been looking for 0.7% growth.

To is rare that Australian employment data fails to raise eyebrows.  This time they  showed unemployment falling to a four-year low at 5.5% with the addition of 42,000 jobs, most of them full time positions.  The Aussie Dollar was consequently the day’s top performer, strengthening by 0.9% for a weekly gain of 2.4%.

The most important ecostats on today’s agenda are for UK retail sales.  There are interest rate announcements from the Swiss National Bank and the Bank of England plus, this evening the BoE Governor and the UK Chancellor are speaking at Mansion House in London.

UK retail sales have been all over the place recently, rising one month and falling the next.  After doing well in April because of Easter, sales for May are expected to be down by around -0.9%.  No change to Swiss or UK interest rates is expected. At the Mansion House this evening the Governor and the Chancellor will make their first post-election utterances.  The word on the street is that Philip Hammond will use the occasion to make the case for what he describes as a “pragmatic” Brexit.  He is said to favour a shift of focus from immigration to jobs and growth.