Spending Weakens More Than Anticipated in Another Potential Hurdle for Policymakers
Though policymakers have expected the recent consumer spending numbers to increase month-over-month by .20%, the figure has decreased by -.30% after the most recent retail and core sales report showed a reduction on spending. This revelation is surprising after the most recent month’s increase of 1.00% in regular retail, but the culprit is likely Obamacare, given the lackluster increase in savings rate. In the core retail basket, spending fell by -.10% as opposed to a gain of .80% in May. The recovery motif pushed by policymakers is not seeing success, which may threaten the state of interest rates if the economy as a whole continues to falter. The impact on the stock market has yet to come however, with the Nasdaq pushing upwards during the latest US cash equity session.
Despite the Chinese government’s difficulties with controlling the volatility in their equity markets, and their impaired economy, GDP numbers released this week show a growth of 7.00% annually and a quarterly increase of 1.70%. These numbers are higher than their 6.90% and 1.30% respective benchmarks. However, these numbers may be an attempt at optimism or a boost to sentiment, as unofficial numbers put the true annual growth closer to 3.50%-4.00%. Stronger retail data and industrial production figures also raised doubts about the veracity of the data at a time when policymakers are trying to instill a greater degree of confidence in local financial markets.
Hints gleaned from the testimony of Mark Carney, the Governor of the Bank of England, pointed towards a potential increase in the 0.50% interest rate that has held steady for 6 years. In reaction to these assumptions, the value of the Pound steeply increased over its peers, despite comments from the Central Bank earlier this year of a similar nature. A Consumer Price Index figure of a flat 0.00% released yesterday belays deflationary pressures in the region. As the Bank of England’s Monetary Policy Committee expects improvements made in the second half of the year, deflated prices in the energy market might work against any approach they may take.
WTI Crude Oil Head and Shoulders Trading Opportunity
The optimism surrounding the emerging nuclear deal saw crude oil briefly tick down before rebounding to the upside amid expectations that sanctions would be lifted by 2016 at the very earliest. Aided by inventory figures showing a massive drawdown to current storage levels, crude prices rose back definitively from near recent lows after benefiting from the broader momentum seen in the WTI benchmark. Nevertheless, with the fundamentals pointing to a resumption of the prevailing longer-term downtrends, downside risks are acute. The emerging head and shoulders bearish pattern emerging in the pair has a bias to the downside as the right shoulder begins to form. Any move below key longer-term support at $50.85 could pave the way for a break of the $50 handle while further appreciation could signal a breakdown in the pattern.
Wishing you a successful trading day,