Trump still yet to pick his Fed chair

This time last week, we thought we’d know who’ll be taking over from Janet Yellen as head of the Federal Reserve when her term expires in February next year. Nonetheless, Politico reports this morning that that decision will probably not be taken this week.

Despite this, a meeting of Senate Republicans yesterday reportedly saw President Trump ask for a show of hands for various candidates for the Fed chairmanship. According to one Senator, Professor Taylor whose eponymous rule outlines a calculation for where interest rates should be based on inflation, growth and unemployment, was said to have won although others said the voting was not seriously done.

This morning’s durable goods orders number was very strong. In September, durable goods orders rose by over 2% – effectively doubling expectations. How much of this was down to the 32% rise in non-defense aircraft orders is unknown, but gains in fabricated metal, computers, electronic products and all other durable goods have underpinned the US dollar this morning.

Market close to unanimous on Bank of England rate hike next week

Preliminary Q3 growth figures from the UK this morning beat expectations, rising at a rate of 0.4% on the quarter. It’s not the growth figures that have directly boosted sterling this morning but the perception that this now removes the final hurdle for the Bank of England to begin raising interest rates. The much beleaguered construction sector was the only industry to drag on growth in the third quarter, with particular strength seen in services and production manufacturing.

With the UK’s Monetary Policy Committee due to meet in a matter of days, inflation is running ahead of target, internal growth estimates have been beaten and consumer credit still runs high, all indicating that we will see the first UK rate rise in over a decade. A fragile consumer, lack of business confidence and negative real wage growth are all reasons why they shouldn’t and could prompt a sharp division among the committee on the future trajectory of rates – which will be a critical driver for the pound next week.

Today, as it stands, the pound’s up over 1% against the greenback, but still well shy of recent highs up above 1.33.

Aussie troubled by slow inflation

Q3 inflation figures from Australia came in well below expectations at 1.8% on the year and 0.6% on the quarter. With such weak inflationary dynamics, it’s unlikely the Reserve Bank of Australia will be coming close to raising interest rates from their all-time low of 1.5% anytime soon. The AUD’s sold off relatively quietly overnight, with AUD/USD hitting 0.77 for the first time since July. Attention now shifts to a speech from the RBA deputy governor Debelle this evening for any comments on the bank’s current thinking.

The day ahead

With the bulk of the US data now out of the way, attention turns to the Bank of Canada rate decision this morning, followed by Kiwi trade balance figures just after the market closes this evening.

Have a great day.