Forex4you - Analytics

    Forex4you

    565.50 6.50/10
    60% of positive reviews
    Real

    Dollar remains flat after FOMC gives mixed signals

    USD

    The dollar index ended the day flat on Wednesday after the FOMC kept policy unchanged and failed to provide any clarity on when a rate hike might occur. It was overall very similar to the June statement, with the few positives about jobs marginally offset by some negatives.

    On of the positives was that the Fed was more unequivocal about improvements in the labour market, stating, for example, that the underutilization of labour resources “diminished” when previously it had stated that they “had diminished somewhat” – now removing the tempering “somewhat”.

    The statement reflected the continued volatility in commodities, and their downward drag on inflation, removing the key sentence that “energy prices have stabilized”.

    It was more positive about housing but said that fixed investment and exports remained “soft”.

    Fed Funds Futures, which provide a useful gauge for when policy changes might occur, pointed to a slightly higher rise in the likelihood of a September rise, from 38.0% to 38.6% and a more significant rise in December to 76.4% from 74.9%, whilst the chances of an October hike actually fell.

    Other data showed a rise in Pending Home Sales of 11.1% yoy in June in line with expectations, and an improvement form the downwardly revised 7.9% of a year ago.

    EUR

    The euro fell in most pairs on Wednesday as the negative impact of the IMF’s pessimistic report released on the previous day continued to have a follow-through effect.

    In the report the international ‘lender of last resort’ had warned the euro-zone was “susceptible” to “negative shocks,” which could undo the fragile recovery. The report further urged the ECB to use more QE to shore up financial sector and corporate balance sheets, and Greece should be given debt relief or it could become another source of risk again.

    As if to highlight the fact, reports on Wednesday spoke of the possibility of Greek prime minister Tsipras having to call another general election as so many of his party had removed their support for him leaving him with an insufficient mandate to rule.

    There was also a revelation that the Finance ministry had set up a covert team during negotiations with the Troika, to create channel’s for expediting payments in drachma in a case of a Grexit.

    On the hard data front German Consumer Confidence which remained unchanged in line with estimates at 10.1.

    GBP

    The pound traded mixed on Wednesday – falling marginally to the dollar but rising against the euro and the yen.

    Data showed a rise in Consumer Credit in June, to 1.2bn from 1.1bn; beating forecasts that it would remain the same.

    Net Lending Sec on dwellings, which measures re-mortgaging activity, rose to 2.6bn from 2.4bn previously when it had been forecast to fall to 2.0bn.

    Mortgage Approvals rose to 66.6k from 64.8k previously, which was above the 66.0K expected.

    Money Supply (M4) in June showed a fall of -0.5% from 0.5% in May, and yoy a -0.3% fall.

    CBI Reported Sales fell to 21 from 29 previously, when it had been forecast to remain unchanged.

    JPY

    The yen strengthened 19 points versus the dollar in Asian trading on Wednesday, gaining momentum after Retail Sales printed higher than expected.

    The currency was trading at 123.63 per dollar at the end of the London session.

    Retail Sales in the world’s third largest economy declined sharply for the third time this year in June, adding signs that consumer spending remains too weak for it to be a key driver for economic growth. Sales fell 0.8% in June from May, following drops in January and March. However on an annualised basis Retail Sales rose 0.9% in June overshooting expectations for a 0.5% increase.

    The data challenges Prime Minister Shinzo Abe to convince companies to continue to increase wages to help consumers to cope with the increased living costs that the BOJ sees rising quickly this year.

    Japan’s economy emerged from last year’s recession as a weak yen boosted manufacturers profits prompting them gradually to increase wages and investment. However exports and household spending have failed to build momentum, leading many analysts to expect flat or slightly negative economic growth for the April-June quarter.”Consumers are hitting the brakes and don´t think the economy is getting any upward momentum at all ” says Yasunari Ueno, chief market economist at Mizuho Securities Co.

    USD

    The dollar index ended the day flat on Wednesday after the FOMC kept policy unchanged and failed to provide any clarity on when a rate hike might occur. It was overall very similar to the June statement, with the few positives about jobs marginally offset by some negatives.

    On of the positives was that the Fed was more unequivocal about improvements in the labour market, stating, for example, that the underutilization of labour resources “diminished” when previously it had stated that they “had diminished somewhat” – now removing the tempering “somewhat”.

    The statement reflected the continued volatility in commodities, and their downward drag on inflation, removing the key sentence that “energy prices have stabilized”.

    It was more positive about housing but said that fixed investment and exports remained “soft”.

    Fed Funds Futures, which provide a useful gauge for when policy changes might occur, pointed to a slightly higher rise in the likelihood of a September rise, from 38.0% to 38.6% and a more significant rise in December to 76.4% from 74.9%, whilst the chances of an October hike actually fell.

    Other data showed a rise in Pending Home Sales of 11.1% yoy in June in line with expectations, and an improvement form the downwardly revised 7.9% of a year ago.

    EUR

    The euro fell in most pairs on Wednesday as the negative impact of the IMF’s pessimistic report released on the previous day continued to have a follow-through effect.

    In the report the international ‘lender of last resort’ had warned the euro-zone was “susceptible” to “negative shocks,” which could undo the fragile recovery. The report further urged the ECB to use more QE to shore up financial sector and corporate balance sheets, and Greece should be given debt relief or it could become another source of risk again.

    As if to highlight the fact, reports on Wednesday spoke of the possibility of Greek prime minister Tsipras having to call another general election as so many of his party had removed their support for him leaving him with an insufficient mandate to rule.

    There was also a revelation that the Finance ministry had set up a covert team during negotiations with the Troika, to create channel’s for expediting payments in drachma in a case of a Grexit.

    On the hard data front German Consumer Confidence which remained unchanged in line with estimates at 10.1.

    GBP

    The pound traded mixed on Wednesday – falling marginally to the dollar but rising against the euro and the yen.

    Data showed a rise in Consumer Credit in June, to 1.2bn from 1.1bn; beating forecasts that it would remain the same.

    Net Lending Sec on dwellings, which measures re-mortgaging activity, rose to 2.6bn from 2.4bn previously when it had been forecast to fall to 2.0bn.

    Mortgage Approvals rose to 66.6k from 64.8k previously, which was above the 66.0K expected.

    Money Supply (M4) in June showed a fall of -0.5% from 0.5% in May, and yoy a -0.3% fall.

    CBI Reported Sales fell to 21 from 29 previously, when it had been forecast to remain unchanged.

    JPY

    The yen strengthened 19 points versus the dollar in Asian trading on Wednesday, gaining momentum after Retail Sales printed higher than expected.

    The currency was trading at 123.63 per dollar at the end of the London session.

    Retail Sales in the world’s third largest economy declined sharply for the third time this year in June, adding signs that consumer spending remains too weak for it to be a key driver for economic growth. Sales fell 0.8% in June from May, following drops in January and March. However on an annualised basis Retail Sales rose 0.9% in June overshooting expectations for a 0.5% increase.

    The data challenges Prime Minister Shinzo Abe to convince companies to continue to increase wages to help consumers to cope with the increased living costs that the BOJ sees rising quickly this year.

    Japan’s economy emerged from last year’s recession as a weak yen boosted manufacturers profits prompting them gradually to increase wages and investment. However exports and household spending have failed to build momentum, leading many analysts to expect flat or slightly negative economic growth for the April-June quarter.”Consumers are hitting the brakes and don´t think the economy is getting any upward momentum at all ” says Yasunari Ueno, chief market economist at Mizuho Securities Co.


    To leave a comment you must or Join us


    By visiting our website and services, you agree to the conditions of use of cookies. Learn more
    I agree