The U.S. Dollar lost all of its momentum following the release of data in the U.S. pointing at clearly decelerated price growth that could disarm the Federal Reserve in its drive to increase borrowing costs further.
Overview
Consumer Price Index in July moved just 0.2%, bringing down the annual CPI average to 3.2% from 3.3%. This represents the smallest back-to-back surge in two years. Disinflation seems to be establishing its trend, and it makes for lower odds of hikes coming for the remainder of the meetings the Fed has scheduled. At the time of writing, chances for a September hike stood at just 10.0%.
Jobless Claims came in close to expectation, only adding to the steady economic situation the U.S. is coping with while consumers hope to see less pain in their checkbooks. Unlike China, there is no concern about deflation, in which the inability for price growth triggers a dramatic rise in unemployment. These fears, documented yesterday after another round of disappointing figures out of China, are starting to ease with the idea that stimulus from the government will be grand, swift, and hopefully influential right away. As for now, risk appetite has renewed while traders breathe over a Fed that can afford to pause again.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
Holiday Donation Results – Thanks for Helping!
Earlier this year, Monex made a donation in honor of your continued trust in us for your FX needs. We’re happy to report that each charity received a percentage of an overall amount based on your votes. Thank you for participating! View Results
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
GBP ⇑
The Pound is also up based on the disinflation lowering the likelihood of the Fed maintaining a hawkish stance on rate hikes. Tomorrow will test the sudden fortunes as more idiosyncratic analysis is done based on U.K. Industrial Production and their 3-month Gross Domestic Product. Any indication from the numbers that recessionary pressures are easing will be welcome boost to Pound flows. May saw a contraction of (-0.1%) so anything in June beyond 0.2% expansion could spark further appreciation.
EUR ⇑
The Euro is up but has deflated somewhat from earlier in the session after the numbers in the U.S. indicated a lack of stubborn inflationary growth. Disinflation in the U.S., while there is uncertainty in Europe over the price of energy sources as well as foodstuffs, is creating inflationary expectation divergence aiding the common currency. News out of the Ukraine conflict front is mixed, with some reports to U.S. Congress being very sober about the lack of territorial advancement while others describe a situation in which Russian fighters are worried in their trenches. We shall see how the next month of headlines affects prices and the chances for the European Central Bank hiking while the Fed seems likely to take a seat and wait.
