Good morning,
Dollar stable as we wait on consumer prices
Yesterday was the quietest day of the week so far with Fed Chair Yellen’s 2nd day of testimony simply another chance for her to reiterate her thoughts that further tightening of monetary conditions i.e. interest rate rises would depend on the path of inflation. There was no new news in her speech and the dollar remained stable as a result.
Speeches from Fed members Brainard and Kaplan kept the dollar from falling away further by emphasising that a move in interest rates towards 2% is still the medium term objective.
US CPI is due at 13.30 and will follow yesterday’s producer price inflation that was sat happily on a consensus figure of 2.0%. Another miss in core prices – as we have seen for three consecutive months – and we would expect the skies to darken a little more over the USD.
US retail sales are also due at the same time and will maintain thoughts that average US consumer is uncomfortable with what would be seen as ‘normal’ levels of consumption despite the improvement in the US jobs market.
UK gives way on Brexit payment
Ahead of another week of Brexit talks starting on Monday, the UK has finally admitted that it will need to pay some form of ‘divorce settlement’ to the EU as part of the Brexit process. Of course, this comes in contrast to the assertions of some of the more prominent Brexiteers and needless to say we are a long way from agreeing how much the UK will pay. No number has been endorsed by lead EU negotiator Michel Barnier but expectations vary from £1bn to one hundred times that figure. No trade deal will be forthcoming until that number is agreed as well as what happens to each other’s migrants in the other country and the Northern Irish border. Some may call the announcement of a payment progress but there is a lot of road to travel before Brexit is not a de facto pressure and weight on the pound and the outlook for the UK economy.
Singapore could be a canary for the rest of Asia
Elsewhere we have seen a miss in Singaporean GDP that may be an early marker for other South East Asian economies given the accents on trade and supply of credit in the area, while China had its credit rating affirmed at A+ with a stable outlook by the ratings agency Fitch.
Have a great day and a better weekend. I am away next week and so will leave you in the more than capable hands of Edd.
Jeremy Cook, Chief Economist