Market Review - 15/10/2014 22:31GMT
Dollar falls sharply as weak U.S. data dampens Fe's rate hike
The single currency rallied sharply from intra-day low of 1.2625 to as high as 1.2885 after the release of much weaker-than-expected U.S. retail sales data which dropped by 0.3% versus economists' forecast of a drop of 0.1%. The New York Fed's Empire State general business conditions index plunged to 6.17 in October from September's 27.54, marking the weakest pace of manufacturing activity in New York state since April. Dow Jones index dropped by more than 400 points before closing down 172 points at 16143.
In the Beige Book report of anecdotal information on business activity collected from contacts across the nation, the Federal Reserve said 'the pace of economic growth appeared similar to that observed in its previous report released in early September. The U.S. economy expanded at a "modest to moderate" pace across much of the nation in recent weeks, giving a picture of stable economic growth despite recent signs of weakness; "most districts reported overall growth in consumer spending that ranged from slight to moderate." The Fed said their reports were generally in line with comments gathered in the prior Beige Book. Beige Book showed one exception was in the retail sector, where general merchandise stores in New York said sales had weakened. That appears consistent with data released earlier on Wednesday that showed a decline in retail sales in September. The Fed also noted that a number of districts reported "modest" wage growth, while several saw upward wage pressures in industries like construction and manufacturing.
Despite dollar's brief bounce to 107.49 in European morning on Wednesday, the greenback nose-dived to 105.20 in New York morning after the release of much weaker-than-expected U.S. retail sales data together with the sharp selloff in global stock markets, however, short-covering subsequently lifted the pair to 106.40 and then swung wildly later in the day.
The British pound swung wildly on Wednesday. Despite initial drop to 1.5877 in Asia, short-covering lifted cable and the pair later rallied to as high as 1.6070 due to dollar's broad-based weakness on downbeat U.S. retail sales and then tumbled to fresh 11-month low at 1.5875 before rebounding again.
BOE's Martin Weale said the Bank of England should pay heed to the swift pace at which Britain's unemployment rate is falling as it considers when to start raising interest rates. Weale also said the BoE should not take too much comfort from a sharp fall in British inflation because it had been "significantly depressed" by sterling's appreciation and by falling oil and commodity prices around the world, something the central bank would look into next month. However, he did say that he would continue to take the economic outlook for the euro zone and the global economy into account when he voted on rates.
Thursday will see the release of New Zealand's manufacturing PMI, consumer inflation expectation, eurozone trade balance and CPI, U.S. initial jobless claims, industrial and manufacturing output, NAHB housing market index, Philly Fed business index, Net L-T flows and overall capital flows.
Dollar falls sharply as weak U.S. data dampens Fe's rate hike
The single currency rallied sharply from intra-day low of 1.2625 to as high as 1.2885 after the release of much weaker-than-expected U.S. retail sales data which dropped by 0.3% versus economists' forecast of a drop of 0.1%. The New York Fed's Empire State general business conditions index plunged to 6.17 in October from September's 27.54, marking the weakest pace of manufacturing activity in New York state since April. Dow Jones index dropped by more than 400 points before closing down 172 points at 16143.
In the Beige Book report of anecdotal information on business activity collected from contacts across the nation, the Federal Reserve said 'the pace of economic growth appeared similar to that observed in its previous report released in early September. The U.S. economy expanded at a "modest to moderate" pace across much of the nation in recent weeks, giving a picture of stable economic growth despite recent signs of weakness; "most districts reported overall growth in consumer spending that ranged from slight to moderate." The Fed said their reports were generally in line with comments gathered in the prior Beige Book. Beige Book showed one exception was in the retail sector, where general merchandise stores in New York said sales had weakened. That appears consistent with data released earlier on Wednesday that showed a decline in retail sales in September. The Fed also noted that a number of districts reported "modest" wage growth, while several saw upward wage pressures in industries like construction and manufacturing.
Despite dollar's brief bounce to 107.49 in European morning on Wednesday, the greenback nose-dived to 105.20 in New York morning after the release of much weaker-than-expected U.S. retail sales data together with the sharp selloff in global stock markets, however, short-covering subsequently lifted the pair to 106.40 and then swung wildly later in the day.
The British pound swung wildly on Wednesday. Despite initial drop to 1.5877 in Asia, short-covering lifted cable and the pair later rallied to as high as 1.6070 due to dollar's broad-based weakness on downbeat U.S. retail sales and then tumbled to fresh 11-month low at 1.5875 before rebounding again.
BOE's Martin Weale said the Bank of England should pay heed to the swift pace at which Britain's unemployment rate is falling as it considers when to start raising interest rates. Weale also said the BoE should not take too much comfort from a sharp fall in British inflation because it had been "significantly depressed" by sterling's appreciation and by falling oil and commodity prices around the world, something the central bank would look into next month. However, he did say that he would continue to take the economic outlook for the euro zone and the global economy into account when he voted on rates.
Thursday will see the release of New Zealand's manufacturing PMI, consumer inflation expectation, eurozone trade balance and CPI, U.S. initial jobless claims, industrial and manufacturing output, NAHB housing market index, Philly Fed business index, Net L-T flows and overall capital flows.
Recommended Content
Editors’ Picks
AUD/USD: Uptrend remains capped by 0.6650
AUD/USD could not sustain the multi-session march north and faltered once again ahead of the 0.6650 region on the back of the strong rebound in the Greenback and the prevailing risk-off mood.
EUR/USD meets a tough barrier around 1.0800
The resurgence of the bid bias in the Greenback weighed on the risk-linked assets and motivated EUR/USD to retreat to the 1.0750 region after another failed attempt to retest the 1.0800 zone.
Gold eases toward $2,310 amid a better market mood
After falling to $2,310 in the early European session, Gold recovered to the $2,310 area in the second half of the day. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.5% and helps XAU/USD find support.
Bitcoin price coils up for 20% climb, Standard Chartered forecasts more gains for BTC
Bitcoin (BTC) price remains devoid of directional bias, trading sideways as part of a horizontal chop. However, this may be short-lived as BTC price action consolidates in a bullish reversal pattern on the one-day time frame.
What does stagflation mean for commodity prices?
What a difference a quarter makes. The Federal Reserve rang in 2024 with a bout of optimism that inflation was coming down to their 2% target. But that optimism has now evaporated as the reality of stickier-than-expected inflation becomes more evident.