Two Fed Presidents Hawkish on Interest Rates

Daily Analysis - 22/03/2016

Atlanta Fed President does not rule out April rate hikes

Atlanta Federal Reserve President Dennis Lockhart was hawkish on US interest rates saying that there was sufficient momentum evidenced in economic data that could justify rate hikes at one of the coming meeting, as early as April, a view also shared by San Francisco Fed John Williams.

US existing home sales slip in February

Existing home sales in the US fell -7.10% in February, way more than the forecasted -2.2%, falling to a seasonally adjusted 5.08 million units versus forecasts of 5.32 million, according to data released by the National Association of Realtors. The NAR's chief economist, Lawrence Yun, said that February numbers showed a meaningful slowdown with problems arising out of supply and affordability. US housing data was one of the key drivers in 2015 contributing more than a quarter percentage point to GDP growth. While new housing starts data released previously showed a 5.20% increase, home builders continued to report a shortage of both land and labor. The US Dollar did not react much to the data.

UK Consumer Inflation expected to rise

Headline inflation in the UK is expected to increase by 0.40% for the month of February, following January's 0.30% increase in consumer prices. Core inflation is however expected to remain unchanged at 1.20% from January. A higher inflation rate could see the GBPUSD erase the losses from Monday as the BoE kept its hawkish stance on the interest rates, which came after the UK's wages saw an uptick to 2.10% from 1.90% previously. The British Pound however remains under pressure with Brexit concerns and cracks with the ruling Conservative party continuing to put downside pressure on the Cable. GBPUSD closed with a strong bearish candlestick yesterday at 1.4367 following Friday's doji candlestick which could signal further downside in prices.

Busy day for EUR

Economic data for the Eurozone is packed today with French, German and Eurozone flash manufacturing and services PMI data. Eurozone flash services and manufacturing PMI's are expected to remain optimistic with an increase to 51.4 on the manufacturing PMI from 51.2 previously while the services PMI is expected to rise to 53.5 from 53.3 previously. Eurozone and German ZEW economic sentiment data is also due today which could prove to be critical for the Euro. EURUSD closed yesterday on a bearish note at 1.1238.

Canada budget due to be presented today

Canadian Prime Minister Justin Trudeau's Liberal party is set to announce its first budget plans after coming into power and is likely to be closely watched across all levels, including by the Bank of Canada. Riding to power with promises of economic help to the middle class, the budget announcement comes amid global economic turmoil and falling oil prices which has shaken the confidence of many Canadians. Last week, Trudeau said that more fiscal measures were needed to boost the economy as monetary policy was nearing its limits. The Bank of Canada held rates steady at its monetary policy meeting a few weeks ago noting that it would wait for the budget release for further assessment

Upcoming Events

Time
Currency
Event
Forecast
Previous

09:00 GMT
EUR
Eurozone Flash Manufacturing PMI
51.4
51.2

09:30 GMT
GBP
CPI y/y
0.40%
0.30%

09:30 GMT
GBP
Core CPI y/y
1.20%
1.20%

13:00 GMT
USD
HPI m/m
0.50%
0.40%

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