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Fed likely to tighten more as Dollar continues to climb

US earnings continued to rise, spurring the Fed to keep on raising interest rates.

Jobs data released on Friday, 7 September confirmed that US economic growth is full steam ahead. Wages in August rose at the fastest pace since the end of the Great Recession. An additional 210,000 jobs were filled, with the unemployment rate remaining at an 18-year low at 3.9 per cent.

The Federal Reserve, which views accelerated wage growth as inflationary, is now more likely to tighten monetary policy faster next year. This also means the Dollar continues to strengthen ahead of the US mid-term election in November.

Meanwhile, there is more positive Brexit news. EU chief negotiator Michel Barnier has said the European Union wants to discuss the Irish border issue. Speaking to British lawmakers, Barnier said that “the inhabitants of Ireland are entitled to some certainty regarding the conditions for future co-operation between the two countries” and that the EU was ready to “simplify” the checks at the border, according to a transcript of the Exiting the European Union Committee meeting on 3 September.

Finally, my focus today shifts to the health of the UK economy. Analysts forecast GDP will have expanded by 0.3 per cent in July. However, if the growth data are above expectations, the Pound will get a boost.

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