The U.S. Dollar is stuck in mostly familiar ranges all around following the Fed Minutes and reaction to them yesterday.
Overview
Notes on the Fed’s last meeting revealed that several officials warned about the possibility of over-tightening, which initially seemed like it would spark a strong equities rally, but that has not materialized. The reality is that there is consensus amongst officials that the economy can withstand further hikes, maybes in smaller increments, especially because inflation has not necessarily diminished significantly. The debate now is just how optimistic markets should be about the Fed’s ability to combat high prices and if the economy will indeed remain resilient and eventually go back to growth.Although regional survey data in the form of Empire Manufacturing surprised at how negative it came in, this morning’s release of the Philadelphia Fed Business Outlook showed a positive reading against a negative expectation. There is uncertainty and disagreement about what is to come for the remainder of the year. We will get a glimpse at how Housing is holding up when Existing Home Sales come out at 10 AM.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro remains fragile as the negativity over China, and internal politics keep the shared currency subdued. Nevertheless, we will see if there is potential for some gains following the Euro-zone’s aggregate Consumer Price Index figures for July.
CPI for the month increased just 0.1%, but the yearly average sits higher than the previous 8.6%, now at 8.9%. The European Central Bank will meet on September 8th, when the thing to monitor will be how aggressive they want to get in combatting inflation. Hikes should boost Euro prospects some, but with Italy having elections, the volatility for Euro is high.
GBP
Sterling remains on a weakening trend following yesterday’s reaction to the highest inflation in four decades that will force the Bank of England to raise interest rates at a faster pace more than likely.
Although higher rates typically mean appreciation for the currency, the fact that the BOE has warned about a recession and its possible damage has traders pulling away from holding Pounds. BOE meeting comes up in less than a month on September 15th.
