FOMC Meeting Results in a Weaker US Dollar Against the Majors, Global Stocks Trade LowerThe FOMC raised rates by 0.25 bps yesterday evening to a 1.75% to 2.00% target range in a hawkish move and reaffirmed its expected forecast of 2 more hikes in 2018 and 3 in 2019.
The move had been fully anticipated by markets and so did not come as a big surprise. The committee cited a solid growth outlook and greater confidence that inflation is converging on target as supporting their decision. The End of year GDP forecast was raised to 2.8% from 2.7% and the FED is strongly committed to the 2% inflation target. The USD reacted by strengthening against other currencies but this moved was faded with the USD now weaker against EUR, GBP, and JPY than when the rate decision was announced. US stocks initially moved higher but again the move was faded and they closed in the red.
UK Consumer Price Index (May) was 0.4% (MoM) and 2.4% (YoY) against an expected 0.4% (MoM) and 2.5% (YoY) from 0.4% (MoM) and 2.4% (YoY) previously. Core Consumer Price Index (YoY) (May) was 2.1% against an expected 2.1% from 2.1% prior. Producer Price Index – Input (May) was 2.8% (MoM) and 9.2% (YoY) against an expected1.6% (MoM) and 7.6% (YoY) from 0.6% (MoM) and 5.6% (YoY) previously. Retail Price Index (May) was 0.4% (MoM) and 3.3% (YoY) against an expected 0.4% (MoM) and 3.4% (YoY) from 0.5% (MoM) and 3.4% (YoY) previously. These data points showed CPI holding steady, with the yearly number above the Bank of England’s 2% target since March of 2017 due to the change in the value of the pound after Brexit. The BOE is factoring this data into their meeting next week and it is their belief that inflation is likely to move back to 2% in 2018 in light of Brexit headwinds. Producer Prices have continued to increase with big beats against the expected numbers. GBPUSD moved lower from 1.33349 to 1.33110after this data was released.
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Eurozone Industrial Production (Apr) was released
US Producer Price Index ex Food and Energy (YoY) (May) was 2.4% against an expected 2.3% from a previous reading of 2.3%. This data beat the expected number of 0.1% this month. The FED will be analyzing this data for developing trends in consumer inflation. EURUSD moved higher from 1.17584 to 1.17816 after this data release.
- EURUSD is up 0.09% overnight, trading around 1.18020.
- USDJPY is down –0.23% in the early session, trading at around 110.080
- GBPUSD is up 0.11% this morning trading around 1.33896
- Gold is flat in early morning trading at around $1,299.30
- WTI is down -0.14% this morning, trading around $66.44
This article was written by FxPro