Summary:
- FED hikes rates as expected forecasting three hikes next year
- Crude oil erases its prior gains despite a higher than expected draw in US stocks
- European stock markets end the day broadly lower just a day before the ECB meeting
The Federal Reserve actually did what it had to do in terms of interest rates, however it left the number of hikes for 2018 and 2019 at the same time which proved to be a bit disappointing. Nonetheless, we haven’t seen any larger moves across financial markets as the US dollar has lost steam just moderately.
Beside the Federal Reserve we got a noteworthy shift in the US Senate which, however will be implemented at the beginning of 2018. In defiance of expectations Republicans lost a one seat in the Senate diminishing its majority just to one seat (51-49), the move that might make harder passing subsequent bills in the future. From a financial markets’ standpoint the most crucial point at the moment is the tax bill which could be voted as soon as next week. Notice that according to Associate Press the two chambers were to reach the agreement in principle on the tax package, however the greenback remained unimpressed when the headlines came up.
The UK labour data surprised to the upside when it comes to wages, but the jobs prints slightly disappointed. GBP reacted positively to these figures as the earning readings have become the most important factor for investors recently. However, note that the real incomes could further deteriorate as the pace of inflation is still above the wage growth. The pound was little changed on the day though as the Brexit thread could play a major role in the upcoming days.
When it comes to the US macroeconomic data there was the inflation release which turned out to be fairly disappointing sending the US dollar vastly lower. In Y/Y terms the headline CPI came in at 2.2% as expected but the core also missed forecasts for a 1.8% rise, with a print of 1.7%. Given the Fed have an inflation target of 2% the headline reading does exceed this but the core reading, which excludes food and energy, doesn’t.
As far as commodities are concerned oil prices saw a substantial pullback right off the bat after the DoE report despite a higher than expected draw in US stockpiles. Notice that the last night’s API showed a print of -7.4M and against this today’s number doesn’t look so low. However the devil is in the details and a health bump seen in gasoline stocks could have dragged oil prices down.
Although the Bitcoin price has settled down lately its major peers have decisively drawn much more attention. We wrote about Litecoin (LTCUSD) yesterday, however there are subsequent digital currencies which successfully caught up BTC. Nonetheless, before we move to analyse them let’s begin with the South Korean thread which seems to slightly turn in BTC’s favour. Namely there was an emergency meeting in Seoul on Wednesday which resulted in an interesting outcome.