Europe Looks To Softer Start Ahead of FOMC

The lacklustre finish on Wall Street (except tech) has followed through into Europe, which points to a softer start before the Fed’s rate decision.

The lacklustre finish on Wall Street (except tech) has followed through into Europe, which points to a softer start before the Fed’s rate decision.

Inflation beats GBP Holds Steady
After yesterday’s very mixed employment data, inflation figures were slightly brighter, although that wasn’t necessarily obvious watching the Pound’s nonchalant reaction.
UK inflation surprised to the upside +0.2% YoY in August, better than the 0% forecast but still a pointy decline from last month’s 1% increase. Core inflation increased 0.9% YoY well down from last months +1.8% rise but still significantly better than the last decade low 0.6% increase forecast.
GBPUSD has shrugged off the upbeat data and continues to trade under US$1.29

Fed focused
The Federal Reserve System aren’t expected to regulate monetary policy today. With no changes in monetary policy expected attention are going to be firmly on the updates staff economic projections (SEPs) and any longer clarification on the shift in policy framework to Average Inflation Targeting. (AIT).
This is the primary time that the Fed has convened since Jerome Powell announced that the Fed will allow inflation to run over the two target for extended periods of your time to form up for long periods when inflation runs under the two target.

The dot plot
There is an honest chance that the dot plot might be lowered to reflect that shift to AIT and therefore the idea of lower rates for extended . this might drag on demand for the US Dollar, which has been struggling in the week heading towards the FOMC announcement.
The prospect of lower rates for extended may be a winner for non-yielding gold. A lowering of the dot plot could see the valuable metal repose on its almost 1% gains thus far in the week . $2000 is back as a transparent target, A level last seen a month ago. US stocks could also push higher as lower rates are business friendly.

US retail sales to stay strong?
Prior to the Fed, US retail sales also will be under the spotlight providing clues over the health of the buyer and their willingness to spend. Expectations are for US retail sales to extend +1.1% MoM in August, which might represent only a really slight slowdown from the +1.2% increase witnessed in July and would support the thought that the economic recovery within the US is constant , albeit at a rather slower rate.
Oil is pushing higher in early trade after the American Petroleum Institute (AP) recorded a big attract inventories, which combined with production disruptions within the Gulf of Mexico thanks to Hurricane Sally have seen WTI and Brent price skip 3.5% across Tuesday and in early trade on Wednesday.
API reported a staggering 9.5 million barrel draw for week ending 9/11 vs a 2.04 million build expected. Despite the large draw, expectations for future oil demand remain weak as economies struggle to recover from the covid crisis and because the health crisis rages on.

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