Rumours of an imminent rate rise in the US were fuelled further yesterday when Fed Chair Janet Yellen once again hinted that such a rate rise was on the cards as she addressed the Economic Club of Washington yesterday. Clearly confident that the outlook for the domestic economy is positive, Yellen’s speech added to building rumours that the Fed will increase rates at the next meeting, which is planned to take place in two weeks. The positive ADP payroll figures that had been released earlier in the day further supported the positive outlook for the USD and acted as a further vote of confidence for the US labour market in advance of the main jobs report, which is due for publication tomorrow.
However, the news for equities was not nearly so positive. Volatile trading following Yellen’s speech resulted in the price of crude falling below $40 a barrel, and a subsequent 1% nosedive for the S&P 500. Fears of a global oversupply of oil were exacerbated by the 1.2 m increase in US oil inventories that was announced last week. US markets were further unnerved by news of a serious shooting in California.
The currency markets will be under the spotlight today as the ECB announces its rates decision. There is a strong potential that the single currency will exhibit some significant moves during the day if expectations of further QE announcements from the central bank come into fruition. However, so far today the Euro is continuing to extend losses against both GBP and USD, whilst cable remains relatively stable despite this morning’s skittish trading ahead of the tier one data releases this afternoon. Over in the states, further unemployment data and ISM non-manufacturing PMI may directly influence currency ahead of the US jobs reports releases that are expected tomorrow.