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Dovish tone on Fed minutes

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Data released yesterday regarding the US economy shows that the cost of living rose at a slower pace than expected in the last 3 months. This points toward the question: will Fed be able to keep its promise and reach the 2.5% inflation threshold this year? The monthly CPI came out 0.1%, under the expected 0.2% value. Inflation will stay soft in the days to come, mainly due to the oil prices that keep going down. Staying in the same financial area, core inflation went up 0.1% in July, smaller than June’s 0.2% rise. Comparing to last year’s July, the figure went up 1.8%. Fed’s minutes stressed that the bank is approaching with small steps the decision of a rate hike, being no clear sign of such thing happening in September. It was clearly stated though that the rise will be gradually, so that the economy will have time to incorporate the new information. As an interesting highlight, during the press-release several officials named China as a market Fed should be aware of. Concerns are regarding a wage acceleration, combined with a possible translation of the phenomenon towards an increased price inflation.

Also yesterday, UK’s ONS (Office for National Statistics) revealed that July’s household spending – represented by the retail sales figure, rebounded slower than forecasted. The result was 0.1%, much under the estimated 0.4% pick-up. To top this, June’s figure was revised from -0.1% to -0.2%. The yearly retail sales growth rate remained unchanged at 4.2%, although estimations were of a 4.3% rise. On a positive note, core retail sale matched the predicted 0.4% rise, an indication of the fact that discussions about the rate hike sometime next year and the drop in the employment numbers did not led towards a decrease of the household spending.

Returning to USA, NAR (National Association of Realtors) published statistical data which put the US home sales at an 8-year high in July, the star regions being the south and west. The 2% rise in July led to an annual rate of 5.59M USD, against the expected retraction to 5.43M USD. June’s numbers were revised from 5.48M USD to 5.49M USD.

WTI’s barrel (West Texas Intermediate – benchmark oil barrel price in America) of light crude oil went on plus yesterday, with a daily high over the $41.00 threshold. According to EIA weekly report (Energy Information Administration), the boost in stockpiles of crude was neglected when US data were not as good as expected and let the crude oil prices to bounce back from multi-year low level ($40.51).

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