Summary
This month’s Fed rate decision is easily the most anticipated, analyzed and discussed since the financial crisis. The Fed has said it is ‘data dependent’, that economic conditions will determine its policy. That statement is untrue, or rather, it is true only at the extreme. If the U.S. unemployment rate was 7 percent or non-farm payrolls had averaged 100,000 for the past two years then data would indeed determine policy and there would be no rate hike. But that is not the case. American economic data can justify either a rate hike or a continuation of the zero policy. The Fed’s decision will not depend on data but on its view of the outcome. What are the likely effects of a 0.25% rate hike? How much of the effect has already been priced into equities, commodities, credit and currency markets? Will a single quarter point increase followed by a long hiatus have any appreciable impact? Do the distortions of zero rates outweigh the benefits? Join us for a unconventional view of the Federal Reserve decision.Latest Live Videos
Editors’ Picks
EUR/USD holds lower ground near 1.1850 ahead of EU/ US data
EUR/USD remains in the negative territory for the fourth successive session, trading around 1.1850 in European trading on Friday. A broadly cautious market environment paired with modest US Dollar demand undermines the pair ahead of the Eurozone GDP second estimate and the critical US CPI data.
GBP/USD keeps losses around 1.3600, awaits US CPI for fresh impetus
GBP/USD holds moderate losses at around 1.3600 in the European session on Friday, though it lacks bearish conviction. The US Dollar remains supported amid softer risk tone and ahead of the US consumer inflation figures due later in the NA session on Friday.
Gold trims intraday gains to $5,000 as US inflation data loom
Gold retreats from the vicinity of the $5,000 psychological mark, though sticks to its modest intraday gains heading into the European session. Traders now look forward to the release of the US consumer inflation figures for more cues about the Fed policy path. The outlook will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.
US CPI data set to show modest inflation cooling as markets price in a more hawkish Fed
The US Bureau of Labor Statistics will publish January’s Consumer Price Index data on Friday, delayed by the brief and partial United States government shutdown. The report is expected to show that inflationary pressures eased modestly but also remained above the Federal Reserve’s 2% target.
A tale of two labour markets: Headline strength masks underlying weakness
Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.
US CPI Live Coverage:
Will January inflation data reaffirm Fed policy hold in March?
The report is expected to show that inflationary pressures eased modestly but also remained above the Fed’s 2% target. Our experts will analyze the market reaction today at 13:00 GMT.