Yahoo Finance Inflation and the FED put the USD in the Spotlight
Earlier in the Day:
Economic data released through the Asian session was on the lighter side this morning, limited to Australia’s December Westpac-MI Consumer Sentiment figures.
The index increased by 3.6% in December to 103.3, more than reversing November’s 1.7% decline. The latest increase took the index 5% higher for the 4th quarter (QoQ), with the report suggesting that consumer confidence may have reached bottom in the 3rd quarter. The RBA’s monetary policy outlook is considered to have provided a boost to consumer confidence, though with tepid wage growth, rising household debt and low household savings rates, the upbeat sentiment may not be fully reflected in consumer spending.
The Aussie Dollar moved from $0.75566 to $0.0.75598 upon release of the figures, before making further gains ahead of the European session. At the time of writing, the Aussie Dollar was up 0.26% at $0.7578, though things could get a little tricky should U.S inflation figures later today suggest that the FED could take a more aggressive rate path next year in tonight’s FOMC monetary policy decision.
Elsewhere, the Yen was up 0.18% at ¥113.34 against the Dollar, with the Dollar on the decline following news hitting the wires of the democrats taking the Alabama senate seat. The U.S administration has already faced challenges in moving policies forward. Losing additional seats to the democrats will be troubling for the administration when they look ahead to next year.
In the equity markets it was a mixed bag, with the Nikkei feeling the weight of the stronger Yen to close out the day down 0.47%, while the ASX200 ended a choppy day with a 0.14% gain. Things were better for the Hang Seng and CSI300, which were up 1.46% and 0.59% at the time of writing with the Casino giants leading the way on the Hang Seng ahead of today’s FOMC monetary policy decision.
The Day Ahead:
Macroeconomic data out of the Eurozone this morning is limited to Germany’s finalised November inflation figures and October industrial production numbers for the Eurozone. While the inflation figures are unlikely to have a material impact, barring a deviation from prelim numbers, the industrial production figures could weigh on the EUR should the numbers fall short of forecasts. Production numbers out of Germany had unexpectedly declined according to figures last week.
At the time of writing, the EUR was up 0.14% at $1.1759, with the gains coming off the back of a softer Dollar through the Asian session. Focus this afternoon will be on the FED and the FOMC economic projections before turning to tomorrow’s ECB monetary policy and press conference.
For the Pound, it’s another important day on the data front with the UK’s employment figures scheduled for release. Forecasts are for a pickup in wage growth in October, together with a fall in the unemployment rate to 4.2%. Positive data could put pressure on the BoE to take a more hawkish stance on policy at tomorrow’s monetary policy committee meeting following the higher than anticipated inflation numbers released yesterday.
While the data will influence, Brexit chatter will also be a factor through the day as EU member states continue to debate Brexit and progress on negotiations.
The Pound was up 0.07% at $1.3327 at the time of writing, with today’s stats, any noise from Brussels and today’s parliamentary vote on Brexit later today the key drivers for the Pound. Tory Party rebels are looking to go against the British Prime Minister’s Brexit deal, which would spell more trouble for Britain’s progress on Brexit and Theresa May’s position at the top.
Across the Pond, it’s a big day for the Dollar. The U.S session kicks off with the release of November’s inflation figures, which could provide further guidance for FOMC members preparing to vote on a rate hike later in the day, together with the release of the FOMC economic projections.
Wholesale inflation figures released on Tuesday had provided further evidence of a build-up of inflationary pressures, but this will need to translate into a pickup in consumer prices for the FED to take any real notice. While expectations are for the vote to be in favour of a rate hike later today, the inflation figures could influence the outlook for next year that will be of significant influence to the Dollar.
At the time of writing, the Dollar Spot Index was down 0.16% at 93.955, with the Alabama vote doing the damage ahead of this afternoons stats and this evening’s monetary policy decision, release of the FOMC economic projections and Yellen’s press conference.
This article was originally posted on FX Empire
