Article Highlights

  • U.S. initial jobless claims at 247K vs. 266K estimate, 237K previous
  • U.S. import prices up 0.4% vs. 0.8% forecast
  • FOMC member Harker: U.S. economy displaying considerable strength
  • Harker: Inflation to reach target this year or next, supports three rate hikes
  • FOMC member Evans: More fiscal stimulus means less need for Fed support
  • Evans: U.S. getting closer to full employment, average hourly earnings upbeat
  • FOMC member Kaplan: Still seeing slack in labor market
  • Kaplan:  USD strength bad for exports
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All eyes and ears were on the FOMC members who gave speeches supporting three rate hikes this year, resulting to a few gains for the Greenback.

Major Events:

FOMC members speeches – Three FOMC voting members took their turns sharing their economic assessment and monetary policy outlook, which mostly supported the idea of seeing three interest rate hikes this year.

For Philadelphia Fed President Harker, the U.S. economy is already displaying considerable strength since GDP in the third quarter grew at a faster pace than in Q2. He also projected that inflation is likely to reach their 2% target sometime this year or the next. As for the labor market, though, he did say that the participation rate is lower than he’d like and that there is still a gap between the skills that employers are seeking and the skill level of job-seekers, creating some degree of slack.

Chicago Fed President Evans was more optimistic about the jobs market, as he pointed out that the U.S. is getting closer to full employment and that the pickup in average hourly earnings is a good sign. He mentioned that additional fiscal stimulus from the incoming administration could lessen the need for Fed monetary policy support, as this might contribute 0.2% to overall growth each year.

Meanwhile, Dallas Fed President Kaplan noted that the dollar’s appreciation could wind up hurting exports. His speech also focused on the potential impact of fiscal policy, explaining that the central bank should keep the government deficit issue in mind and discuss their balance sheet for 2017 while debating the timing of rate hikes. Fed officials Bullard and Lockhart also took the stage but they aren’t voting members and they simply reiterated their remarks from yesterday’s testimonies.

Major Market Movers:

USD – The Greenback wasn’t exactly off to a running start but it managed to regain some ground towards the end of the session.

EUR/USD climbed to a high of 1.0685 then retreated to 1.0625, GBP/USD fell from 1.2280 to 1.2164, USD/JPY is up from 114.30 to 114.66, and AUD/USD is slightly lower from .7520 to .7485.

GBP  Sterling resumed its slide after getting a bit of respite from reports that Prime Minister May has a Brexit speech coming up.

GBP/JPY pulled up to 140.45 then sank to a low of 138.93, EUR/GBP climbed from .8675 to a high of .8747, GBP/AUD slid from 1.6360 to a low of 1.6225, and GBP/NZD tumbled from 1.7265 to a low of 1.7050.

Watch Out For:

  • 12:00 am GMT: Fed head Yellen’s speech
  • Tentative: Chinese trade balance (345B CNY expected, 298B CNY previous)

See also:

London Session Recap

Asian Session Recap

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