US retail sales released yesterday arrived weaker than expected at 0.1% for the second month in a row against expectation of 0.5%.

It appears that the US economy may have cooled in the third quarter which will raise some question marks as to the timing of the next interest rate increase. The Fed are currently on course to raise interest rates at the December meeting by a quarter of a point to 2.25% and another three times through 2019 to take rates to the equilibrium level of around 3%.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD0.75%$2,000

US President Donald Trump would rather see rates rise less quickly, and in a signal to the Fed last week he stated that “The Fed is doing what they think is necessary, but I don’t like what they are doing because we have inflation really in check.” Federal Reserve Chair Jerome Powell sees things differently and is taking precautions now to avoid a rapid climb in inflation and interest rates further down the line which could be more painful for both Americans and the economy.

US data to watch out for this week

US data

Industrial production numbers are released this afternoon and there are a number of housing data releases tomorrow which could be of interest. How the economic data performs in these coming weeks will have some bearing on whether or not the Fed does definitely hike this December.

Whether the Fed will be prepared to change path and not raise interest rates at the December meeting remains to be seen following comments from President Donald Trump. Other economic fundamentals are performing well; unemployment in the US recently fell to a 48-year low whilst consumer confidence is high. US stock markets dropped sharply last week so it will be interesting to see whether Jerome Powell is worried enough that there is a slowdown in change to monetary policy.

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