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    Fed’s Powell not sure about September lift-off checks dollar

    USD

    The U.S dollar fell on Wednesday after lower-than-expected employment data and doveish commentary from Fed’s Powell dampened the previously hawkish outlook and questioned the growing consensus for a September rate hike.

    Fed executive voting member Jerome Powell said he had not made up his mind whether to vote for a rate hike in September. He also said he would be watching data closely in the run up to the September FOMC with a greater emphasis on employment data. His stance contrasted with another voting member Dennis Lockhart, who said on Tuesday that it would take a substantial deterioration in the economic picture for him to change his mind about voting for a rise in September.

    In an unfortunate coincidence the release of ADP Employment Change – which measures payrolls – showed a lower-than-expected result, leading investors to see this as a sign members with the same stance as Powell might be thinking twice about voting for a rise at the September meeting.

    The dollar was also hit by a deepening of the Trade deficit, which fell to -43.8bn from -40.90bn previously, marginally deeper than the estimate of -43.0bn.

    As the day progressed, however, the dollar recovered, after Services PMI rose to 55.7 from 55.2 and Non-Manufacturing PMI increased to 60.3 from 56.0, when it had only been expected to rise to only 56.3.

    EUR

    The euro fell on Wednesday after Retail Sales came out lower-than-expected, falling -0.6% in June from 0.1% in the previous month; which was sharper than the -0.2% decline forecast.

    The increase in Retail Sales also slowed-down on an annual basis, rising by only 1.2% instead of the 2.0% estimated, and far lower than the 2.6% in the previous year.

    A rise in Services PMI offset slower retail sales data, after it unexpectedly increased to 54.0 from 53.8 in July and Composite PMI rose to 53.9 from 53.7. As far as individual country’s went Germany saw a higher-than-expected rise, France came out in line with forecasts and Italy undershot expectations – all however, registered readings over 50 which is indicative of expansion rather than the contraction signalled by results below 50.

    GBP

    The pound weakened initially on Wednesday after Services PMI slowed down in July, falling to 57.4 from 58.5 previously. Although the data showed a fall, it was from a relatively high level and analysts considered the result a temporary bump in an otherwise upward trend rather than the start of a more negative trend.

    Of more interest to investors is the welter of data expected to be released on Thursday, which the press had dubbed “Supper Thursday” because so many market moving releases are expected. For starters there is the BOE rate decision, then the minutes of the same meeting, including how the votes fell, then the quarterly inflation report, and finally a press conference with BOE governor Carney.

    Expectations are for a 7-2 split in the voting, with two voting for a rise. There has been speculation hawks might get a third vote, and if so this would be bullish for sterling.

    Any rise in inflation expectations in the quarterly report would also be bullish for the pound. The previous report expected inflation to hit 2.0% in 2 years, which is in line with the BOE’s target. A mixture of lower oil prices and stronger pound since, however, could push down forecasts, and if so that might be bearish for the currency.

    JPY

    The yen extended its losses against the dollar in the Asian session on Wednesday morning and throughout the day as investors felt the Fed. was moving closer to raising interest rates at its September meeting on the back of expectations of a strong jobs report for July to be released on Friday in the form of Non-Farm Payrolls. The yen was trading at 124.84 per dollar in the second half of the New York session.

    Data releases in Japan today revealed its services PMI dropped to a seasonally adjusted 51.2 in July from 51.8 in June.

    Yesterday Etsuro Honda, special economic adviser to Japan´s Prime Minister, said that he feels there is no need for the central bank to deploy additional stimulus to meet its 2.0% inflation goal next year, as it could cause the yen to further weaken and prices to rise.

    In another development, according to unattributable sources, the BOJ has decided to reduce their annual number of monetary policy meetings from 14 to 8 and they will be timed to coincide with the US FOMC.

    USD

    The U.S dollar fell on Wednesday after lower-than-expected employment data and doveish commentary from Fed’s Powell dampened the previously hawkish outlook and questioned the growing consensus for a September rate hike.

    Fed executive voting member Jerome Powell said he had not made up his mind whether to vote for a rate hike in September. He also said he would be watching data closely in the run up to the September FOMC with a greater emphasis on employment data. His stance contrasted with another voting member Dennis Lockhart, who said on Tuesday that it would take a substantial deterioration in the economic picture for him to change his mind about voting for a rise in September.

    In an unfortunate coincidence the release of ADP Employment Change – which measures payrolls – showed a lower-than-expected result, leading investors to see this as a sign members with the same stance as Powell might be thinking twice about voting for a rise at the September meeting.

    The dollar was also hit by a deepening of the Trade deficit, which fell to -43.8bn from -40.90bn previously, marginally deeper than the estimate of -43.0bn.

    As the day progressed, however, the dollar recovered, after Services PMI rose to 55.7 from 55.2 and Non-Manufacturing PMI increased to 60.3 from 56.0, when it had only been expected to rise to only 56.3.

    EUR

    The euro fell on Wednesday after Retail Sales came out lower-than-expected, falling -0.6% in June from 0.1% in the previous month; which was sharper than the -0.2% decline forecast.

    The increase in Retail Sales also slowed-down on an annual basis, rising by only 1.2% instead of the 2.0% estimated, and far lower than the 2.6% in the previous year.

    A rise in Services PMI offset slower retail sales data, after it unexpectedly increased to 54.0 from 53.8 in July and Composite PMI rose to 53.9 from 53.7. As far as individual country’s went Germany saw a higher-than-expected rise, France came out in line with forecasts and Italy undershot expectations – all however, registered readings over 50 which is indicative of expansion rather than the contraction signalled by results below 50.

    GBP

    The pound weakened initially on Wednesday after Services PMI slowed down in July, falling to 57.4 from 58.5 previously. Although the data showed a fall, it was from a relatively high level and analysts considered the result a temporary bump in an otherwise upward trend rather than the start of a more negative trend.

    Of more interest to investors is the welter of data expected to be released on Thursday, which the press had dubbed “Supper Thursday” because so many market moving releases are expected. For starters there is the BOE rate decision, then the minutes of the same meeting, including how the votes fell, then the quarterly inflation report, and finally a press conference with BOE governor Carney.

    Expectations are for a 7-2 split in the voting, with two voting for a rise. There has been speculation hawks might get a third vote, and if so this would be bullish for sterling.

    Any rise in inflation expectations in the quarterly report would also be bullish for the pound. The previous report expected inflation to hit 2.0% in 2 years, which is in line with the BOE’s target. A mixture of lower oil prices and stronger pound since, however, could push down forecasts, and if so that might be bearish for the currency.

    JPY

    The yen extended its losses against the dollar in the Asian session on Wednesday morning and throughout the day as investors felt the Fed. was moving closer to raising interest rates at its September meeting on the back of expectations of a strong jobs report for July to be released on Friday in the form of Non-Farm Payrolls. The yen was trading at 124.84 per dollar in the second half of the New York session.

    Data releases in Japan today revealed its services PMI dropped to a seasonally adjusted 51.2 in July from 51.8 in June.

    Yesterday Etsuro Honda, special economic adviser to Japan´s Prime Minister, said that he feels there is no need for the central bank to deploy additional stimulus to meet its 2.0% inflation goal next year, as it could cause the yen to further weaken and prices to rise.

    In another development, according to unattributable sources, the BOJ has decided to reduce their annual number of monetary policy meetings from 14 to 8 and they will be timed to coincide with the US FOMC.


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