Markets brace themselves for possible US interest rate increase

Daily update

Yesterday’s markets

• EUR Industrial Production
• USD FOMC Minutes Report

Yesterday explained

Yesterday the Industrial production report came out for Euros and exceeding expectations where it initially started at -0.5% and reached 1.8% where it was speculated to hit 1.5%. Even though these reports were more than satisfactory, the EUR was still under pressure from the USD as it was already dominating as the currency of the week and on top of that the investors were still shrugged off the positive numbers of the industrial production as their focus was on the FOMC Minutes Meeting that were to take place later on in the day.

On the GBP front, Theresa May, the Prime Minister of UK stated earlier on in the week that UK will be facing a hard Brexit and that article 50 will commence as planned which caused the GBP to decline and with the compounded effect it had after the “flash crash” the GBP was dropping rapidly. Later on the P.M stated that she will not be voting for her Brexit strategy and in her place the parliament will vote so that her plans can be scrutinized critically and based on their analysis amendments will be done accordingly. The later announcement caused the GBP to increase in currency confidence slightly but this slight boost was short lived due to investor’s anticipation of the FOMC minutes where they were finding clues in hopes of a Rate Hike.

The market has come to depend on US Fed that's only raised rates once since June 2006 and expanded its balance sheet by $3.7 trillion during three rounds of quantitative easing. At the end of the FOMC minutes meeting, the rate decision was 69% positive and it is most likely that a rate hike will indeed take place in December.

Today’s market

• CNY Trade Balance
• EUR Consumer Price Index from Germany
• GBP BOE’s Governor Carney’s speech

Today’s focus

Starting the day, China has released trade reports such as Imports, Exports and Trade Balance which all came back negative. We will then be facing Consumer Price Index that measures the average price change for all goods and services purchased by households for consumption purposes. The day will end soon after with BOE’s Governor Carneys speech which will affect the GBP as it will be the major event for the day depending on the outcome of the meeting.