The lacklustre finish on Wall Street (expect tech) has followed through into Europe, which points to a softer start ahead of the Fed's rate decision
Inflation beats GBP Holds Steady
After yesterday's very mixed employment data, inflation figures were slightly brighter, although that wasn't necessarily obvious looking at the Pound's nonchalant reaction.
UK inflation surprised to the upside +0.2% YoY in August, better than the 0% forecast but still a sharp decline from last month's 1% increase. Core inflation increased 0.9% YoY well down from last months +1.8% rise but still significantly better than the decade low 0.6% increase forecast.
GBPUSD has shrugged off the upbeat data and continues to trade under US$1.29
Fed in focus
The Federal Reserve are not expected to adjust monetary policy today. With no changes in monetary policy expected attention will be firmly on the updates staff economic projections (SEPs) and any further clarification on the shift in policy framework to Average Inflation Targeting. (AIT).
This is the first time that the Fed has convened since Jerome Powell announced that the Fed will allow inflation to run over the 2% target for extended periods of time to make up for long periods when inflation runs under the 2% target.
The dot plot
There is a good chance that the dot plot could be lowered to reflect that shift to AIT and the idea of lower rates for longer. This could drag on demand for the US Dollar, which has been under pressure this week heading towards the FOMC announcement.
The prospect of lower rates for longer is a winner for non-yielding gold. A lowering of the dot plot could see the precious metal build on its almost 1% gains so far this week. $2000 is back as a clear target, a level last seen a month ago.
US retail sales to remain strong?
Prior to the Fed, US retail sales will also be under the spotlight providing clues over the health of the consumer and their willingness to spend. Expectations are for US retail sales to increase +1.1% MoM in August, which would represent only a very slight slowdown from the +1.2% increase witnessed in July and would support the idea that the economic recovery in the US is continuing, albeit at a slightly slower rate.
Oil
Oil is pushing higher in early trade after the American Petroleum Institute (AP) recorded a significant draw in inventories, which combined with production disruptions in the Gulf of Mexico due to Hurricane Sally have seen WTI and Brent price jump over 3.5% across Tuesday and in early trade on Wednesday.
API reported a staggering 9.5 million barrel draw for week ending September 11 vs a 2.04 million build expected. Despite the huge draw, expectations for future oil demand remain weak as economies struggle to bounce back from the covid crisis and as the health crisis rages on.
Oil chart
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
AUD/USD stand firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518.
EUR/USD faces a minor resistance near at 1.0750
EUR/USD quickly left behind Wednesday’s small downtick and resumed its uptrend north of 1.0700 the figure, always on the back of the persistent sell-off in the US Dollar ahead of key PCE data on Friday.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.