Daily Brief For Thursday, December 15

1. Gold fell 2.92% to $1,129.75 to a 10-1/2-month low on Thursday after the Federal Reserve sounded an unexpectedly hawkish note on U.S. interest rates, sparking a surge in Treasury yields and sending the dollar to a 14-year high. Lifting the federal funds rate to a 0.50-0.75 percent range on Wednesday, the U.S. central bank flagged a faster pace of hikes next year as it geared up for the incoming Trump administration’s pledges to cut taxes and boost spending. That sparked a rally in the dollar, pressuring assets priced in the currency, while U.S. Treasury yields soared, lifting the opportunity cost of holding non-yielding gold. “The Fed was more hawkish than expected, which re-started this dollar rally,” ABN Amro analyst Georgette Boele said. “With yields rising in the United States and the dollar massively up, that’s the worst possible combination for gold.”

2. GBP/USD fell 1.11% to 1.2426. The pound was trading at two-week lows against the broadly stronger dollar on Thursday after the Bank of England kept interest rates on hold a day after the Federal Reserve raised rates for the first time this year. The BoE said its nine member monetary policy committee was unanimous in the decision to keep interest rates at a record low of 0.25%. Policymakers also voted 9-0 to keep the bank’s bond-buying program target at £435 billion and to continue with its new plan to buy up to £10 billion of corporate bonds. The bank said it expects inflation to rise to its 2% target within six months. The increase in sterling and in oil prices since its last meeting are expected to result a slightly lower path for inflation than envisaged in the November inflation report, the bank’s meeting minutes said. The bank still feels inflation is likely to overshoot the target later in 2017 and through 2018.

Interesting for Friday 16/12/2016

Currency Pairs

• EUR

Highly Important Events

• 12:00 (GMT+2:00 Jerusalem) CPI YoY (Nov). The Consumer Price Index (CPI) measures the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. 

• RUB

Highly Important Event

• 12:30pm (GMT+2:00 Jerusalem) Interest Rate Decision (Dec). The Bank Rossii decision on short term interest rate. The decision on where to set interest rates depends mostly on growth outlook and inflation. The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. 

• USD

Highly Important Event

• 15:30pm (GMT+2:00 Jerusalem) Building Permits (Nov). Building Permits measures the change in the number of new building permits issued by the government. Building permits are a key indicator of demand in the housing market.