The US dollar strengthened significantly against the euro, approaching to a maximum of 16 March. Support for the currency continued to recent comments by the Fed regarding the prospects of increasing the Fed’s interest rate. Yesterday the head of the Federal Reserve Bank of Philadelphia said Patrick Harper that allows two or three rate hikes before the end of the year provided that the statistical data will point to the strengthening of the US economy. “I can easily imagine two or three rate hikes before the end of the year – he said -. If the new statistical data will not match my vision to strengthen the economy, I am ready to take a break, but in the opposite case, the rise rate in June seems to me to be justified.”
President of the Federal Reserve Bank of San – Francisco John Williams also said that predicts two or three rate hikes in 2016. However, he added that a rate hike is still dependent on economic statistics. Today futures on interest rates Fed indicate that the probability of a rate hike in June is 34% versus 4% at the beginning of last week.
The growth of the US currency also contributed to the optimistic data on the US housing market. The Commerce Department reported that in April, sales of new single-family homes rose to a maximum of more than eight years, and prices have reached record highs. According to the data, new home sales jumped 16.6 percent to a seasonally adjusted annual rate reached 619 000 units, the highest level since January 2008. The percentage increase was the largest since January 1992. Sales in March were revised up to 531,000 units from the previously reported 511,000 units. Economists had forecast that sales of new buildings, which accounted for about 10.2 percent of the housing market, reached only 523,000 units last month. The report came after a fairly upbeat data on housing sales in the secondary market and housing construction. He also added factors to the retail sales report and industrial production, suggesting that the economy is gaining momentum after growth almost stalled in the first quarter.
The pound has risen in price by about percent against the dollar, reaching a week high, helped by comments of the Bank of England, Mark Carney, as well as the results of the latest opinion poll on the subject of the referendum. Today, Carney said that the Central Bank will provide stability and order in the markets in anticipation Brekzita, using auctions to provide liquidity. In addition, Carney said that if Britain will remain part of the EU, the next likely step will be the Central Bank interest rate rise
As for the poll, he pointed out that the number of Britons wanting the country to remain in the European Union, sharply higher than the number of opponents. The latest survey published in the Telegraph newspaper on Tuesday showed that the number of followers of “Lost” campaign has a 13 percent advantage over the number of opponents. In favor of the fact that the country remains in the EU, 55% of respondents were in favor, with the support of «Brexit» 42%.
Later this week, investors will be watching the consumer confidence index of the UK, as well as the report on GDP. Given the economic slowdown, the rise of political uncertainty and the decline in the index GfK in the last month, experts predict that the consumer confidence index drops again. Meanwhile, the second estimate of GDP for the 1st quarter, is likely to confirm the early predictions of slowing economic growth. According to expert estimates, GDP grew by 0.4% after rising 0.6% in the 4th quarter of 2015. In annual terms, GDP growth is expected to stabilize at 2.1%.
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