MONEY MARKETS – US fed fund futures rise as rates seen on hold

NEW YORK (Reuters) – U.S. federal fund futures rose for the second day in a row on Friday as investors continued to push back expectations for the timing of a Federal Reserve interest rate hike on the back of a benign inflation report. Futures on Friday were showing an implied fed funds rate of about 0.39 percent in September, down from an implied rate of about 0.43 percent on Thursday. The September futures contract was very near the all-time highs reached in late November.

Friday’s rise followed a government report showing the consumer price index rose by 0.1 percent in December after a 0.4 percent increase in November. The slight rise in prices was seen as tame enough that the Fed will not have to raise rates anytime soon from the current level near zero to combat inflation. “CPI does not appear to be flashing significant inflationary pressure … the Fed has nothing to worry about now,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. [Read the full article]

NEW YORK, Jan 15 (Reuters) – The U.S. dollar rose broadly on Friday helped by data showing a rise in manufacturing and stable consumer price inflation, while concerns about the struggling Greek economy weighed on the euro. Market confidence in Greece has fallen as its deficit has ballooned and credit ratings have been cut. For more see [ID:nLDE60D1N0]. “What is really crushing the euro is additional concern about the serviceability of the massive amount of debt rung up in Greece,” said Dan Cook, a senior market analyst at IG Markets in Chicago. Until the issue is resolved “we will likely see a lot of selling pressure on the euro,” he added. Analysts said Friday’s string of U.S. data releases were mostly in line with expectations, showing some improvement in a regional manufacturing indicator and tame consumer prices, while a measure of consumer sentiment was little changed. [Read the full article]

MEXICO CITY, Jan 15 (Reuters) – Mexican bonds gave up early gains on Friday after the central bank warned that it could raise interest rates if new taxes and recent energy price hikes have a bigger impact on inflation than expected. After bidding as low as 7.78 percent, the yield on the government’s benchmark 10-year bond MX10YTRR bid at 7.82 percent after the central bank’s monthly policy statement, down 1 basis point from Thursday. The peso MXN= MEX01 slipped 0.06 percent to 12.675 per U.S. dollar while the IPC stock index .MXX lost 0.51 percent to 32,562 points. The Mexican central bank left its benchmark interest rate steady at 4.50 percent during its fifth straight policy meeting, saying weak economic growth would dampen the effects of tax increases on inflation. For details, see [ID:nN15113109] However, the bank said there was a risk the tax hikes could spur higher inflation expectations and put additional pressure on consumer prices. [Read the full article]

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