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September 2016

Barrage of US data disappoints

Published: Friday 16 September 2016

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  • Barrage of US data disappoints 
  • EU consumer prices comes in as expected
  • BoE’s monetary policy minutes failed to spark any volatility
Yesterday's calendar was very busy in terms of economic data and central bank rate decisions but surprisingly these events had little impact on any of the major currencies. Retail sales from the UK remained resilient in August a further sign that consumers have largely shrugged off the Brexit vote however this news failed to lift Sterling which is evidence that this week’s price action is indicating bearish sentiment towards the Pound as the market ignores the good news and focuses only on the bad.

The Bank of England’s monetary policy minutes failed to spark any volatility. UK policymakers were unanimous in their decision to keep everything unchanged – this was expected after the aggressive stimulus package agreed only last month to cushion the economy following the Brexit vote.  The Bank of England recognised recent data has been better than expected and initial impact from stimulus is encouraging but their outlook for the UK economy has not changed from the August meeting and there was a lower revision to their inflation forecasts. The minutes showed a majority of officials expect to cut the BOE’s benchmark rate later this year if the next sets of forecasts paint a picture of the economy that is broadly consistent with August’s projections.

There was a barrage of US data which overall disappointed and only strengthened the case for the FED to maintain current interest rates for the time being. Retail sales dropped 0.3%, the first decline in 5 months whilst producer price growth and industrial growth also declined. So between weak job growth, consumption and spending it is unlikely the Federal Reserve will raise rates next week despite the hawkish rhetoric from FED members.

Elsewhere Eurozone consumer prices came in line with expectations and had little impact on the Euro. European Central Bank’s Weidmann said the ECB should maintain the use of the capital key in its asset purchase programme but warned that the effectiveness of monetary policy diminishes over time while the side effects increase.

Quiet day today, mainly US data centric with the main event being inflation figures due from the US at 13.30 GMT. The decline in producer prices should translate to weaker consumer price inflation and is likely to be the last bit of the puzzle for the FED to maintain interest rates at 0.5%
 

Quotes


We learn something every day, and lots of times it’s that what we learned the day before was wrong.
                -Bill Vaughan

The cure for boredom is curiosity. There is no cure for curiosity
                -Ellen Parr

Some people like my advice so much that they frame it upon the wall instead of using it
                -Gordon R. Dickson
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
EUR All Day EU: Economic summit    
CAD 13:30 Canada: Manufacturing sales m/m 0.8% 0.6%
CAD 13:30 Canada: Foreign securities purchases 9.02b 10.12b
USD 13:30 US: CPI m/m 0.0% 0.1%
USD 13:30 US: Core CPI m/m 0.1% 0.2%
USD 15:00 US: Prelim UoM consumer sentiment 89.8 91.0

Latest FX news by Denzil Rickerby

Daily Currency Analysis by William Busby



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