Chairwoman of the Fed Janet Yellen was uncharacteristically upbeat concerning the state of the economy yesterday. The normally dovish Yellen remarked that it would be “unwise” for the Fed to wait too long to hike rates: “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession.” In response the market-priced implied probability for a March rate hike rose from 30% to 34%, while a June hike clocked in at more than 73%.
Data in the U.S. has been released this morning that certainly supports Janet Yellen’s optimism. Retail Sales for January increased .4% from December against expectations for a .1% bump. The Consumer Price Index, that indicator of inflation, logged a .6% increase, far outpacing the .3% consensus figure. USD is feeling the love.
Data out of the U.K. was mixed. The job market there has recently overachieved in employment numbers, but underwhelmed in wage growth. Always a key indicator of the state of the economy, wage growth seems to be the (non-GDP) metric that is having the most impact on currency movements at this time both in the U.K. as well as the U.S.
The GDP in Greece is decreasing as tensions between the Greek government and her creditors increase. The IMF is strongly affirming that Greece must add extra measures if it is to reach the surplus it is aiming for, while Prime Minister Tsipras is staunchly refusing to entertain discussion of any further measures. The informal deadline for the latest Greek bailout talks is February 20th, with Greece’s €7 billion payment to the European Central Bank coming due in July.
EURUSD: Euro is down a bit, as it continues to feel the pressures of the political risks in France and Greece.
GBPUSD: Sterling is down substantially against the rising dollar, with weak wage growth as the major catalyst for the pound’s decline.
AUDUSD: Aussie dollar is down slightly against the U.S. dollar.
USDCAD: U.S. dollar is up slightly against the loonie on broad dollar strength.