Fed Minutes hawkishness propelled USD higher – Lloyds Bank

By FXStreet Research Team at Lloyds Bank, suggests that a surprisingly hawkish set of US Fed minutes of the 26-27 April FOMC meeting, supported by positive economic data, led to a rally in the US dollar and Treasury yields over the past week.

Key Quotes

“The minutes indicated that most Fed officials saw a June hike as likely if economic developments warranted it. Such an eventuality is far from a done deal, but it nevertheless achieves the Fed’s aim to give itself the flexibility to raise rates without unduly surprisingly the markets. At the time of writing, fed funds futures are pricing in a 30% probability of a June rate rise, compared with only 4% at the start of the week.

Sterling was also a strong performer, with bookies’ EU referendum ‘remain’ odds reportedly shortening and UK retail sales also proving to be resilient. The latter rose by a monthly 1.3% (including fuel) in April, while upward revisions point to a stronger Q1. Labour market figures also pointed to a better momentum in employment, while unemployment held at a 10-year low of 5.1%. Underlying pay growth, however, fell back to 2.1%y/y in the three months to March. Headline CPI inflation fell to 0.3%y/y …read more

Source:: FX Street