- Sterling boosted by retail sales data
- Federal Reserve meets to decide on interest rates and Quantitative Easing (QE) plans
By David Johnson
Tuesday came and went with little impact on the forex markets. The markets appear to have run out of shock and awe when it comes to the US versus North Korea rhetoric. Donald Trump’s talk of annihilating North Korea if they threaten America or its allies is all very playground, but a bit hollow when they are shooting ballistic missiles over Japan with impunity. However, Trump did say one thing that was quite profound…strange, I know. He said, "The problem in Venezuela is not that socialism has been poorly implemented, but that socialism has been faithfully implemented." Good script writer you’ve got there, Mr Trump.
Today will be much more interesting for Sterling traders in particular with the release of UK retail sales data. The markets have undoubtedly factored in the impact of wages growth still lagging inflation, anticipating a slight slowdown but some growth. The actual results were better than forecast, showing 1% growth over the past month, and boosting the Pound. That data will be something else for the Bank of England’s Financial Policy Committee to discuss when they meet today.
The markets are quiet until later, when the Federal Reserve Open Market Committee (FOMC) meets. Few are expecting any change from the FOMC in this month’s meeting, but they may start to indicate when they will consider reducing their $4.5 trillion QE budget and/or raising interest rates again. The US economy has been shaped by the Federal Reserve’s massive cash injection over the past 10 years. Cutting that budget down will have repercussions for the equities markets, bond markets, the USD and other asset classes. Investments across the globe have been funded by cheap cash, so the record highs in the Dow Jones Index and others are no coincidence. The Federal Reserve needs to be very careful about how it handles this contraction if it wishes to avoid serious market jitters. They know that, which is why they are approaching the matter with real caution.
Overnight tonight we will get the New Zealand economic growth data for Quarter Two of the year. An annualised Gross Domestic Product (GDP) growth figure of 2.5% is expected and that would be lower than Q1. The Kiwi Dollar, which has weakened of late, will be very volatile around this release and could weaken significantly if the data is poorer than 2.5%. Tonight could be a great night for automated orders whether you need to buy or sell New Zealand Dollars.
And if you want to feel very, veerry, veeeeerrrrry small, Google the images of Earth taken by the Cassini probe from within Saturn’s rings, roughly a billion miles away. The single pixel you see as earth houses all of us. Makes you stop and think.