The FED and U.S Inflation Figures Put the Dollar Front and Center

Geopolitics and the FED will keep the markets busy today.
Bob Mason
Federal Reserve building with twenty dollar bill on grunge texture

Earlier in the Day:

It was another relatively busy day on the Asian economic calendar in the earlier hours of this morning.

The Japanese Yen, Kiwi Dollar and the Aussie Dollar were in action in the early part of the day.

On the geopolitical front, mixed updates over the 15th December tariff rollout also influenced early in the day.

For the Kiwi Dollar

Electronic card retail sales rose by 2.6% in November, coming in well ahead of a forecasted 0.5% increase. In October, sales had fallen by 0.6%.

Both Singles Day and Black Friday sales promotions drove spending, delivering the largest increase in spending since January 2017.

According to NZ Stats,

  • Spending rose across all 6 of the retail industries, month-on-month, with the durables seeing the largest increase, up by 5.4%.
  • Groceries and liquor (+1.4%) also saw a rebound in sales after a fall in October.
  • Core retail spending, which excludes spending on fuel and vehicles, rose by 2.6%.

The Kiwi Dollar moved from $0.65458 to $0.65446 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.28% to $0.6527. While the sales figures, were upbeat, negative sentiment towards economic growth weighed early in the day.

For the Aussie Dollar

Consumer sentiment prices provided direction in the early part of the day. The Westpac Consumer Sentiment Index fell by 1.9% to 95.1 in December, partially reversing a 4.5% rise from November. Economists had forecast a 0.7% decline.

According to the latest Westpac Report, all components of the index declined in December

  • The economy, next 5-years sub-index fell by 2.4%, with the next 12-months index down by 1.1%.
  • Year-on-year the next 5-years sub-index was down by 11%, with the next 12-months sub-index down by 14.2%.
  • The Finances vs a year ago sub-index fell by 3.6%, leaving it down 9.5% on a year ago.
  • For the finances next 12-months, the sub-index fell by 0.5% to leave it down by 7.0% year-on-year.
  • The time to buy a major household item sub-index fell by 2.1%, leaving it down by 3.7% year-on-year.
  • Sentiment towards labor market conditions also worsened, with the Unemployment Expectations Index rising to 1.1%. Year-on-year, the index was up by 14% to a two-and-a-half-year high.

The Aussie Dollar moved from $0.68095 to $0.68101 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.07% to $0.6814.

For the Japanese Yen

The BSI Large Manufacturing Conditions Index from -0.2 to -7.8% for the 4th quarter. Economists had forecast a rise to 0.2.

The Japanese Yen moved from ¥108.774 to ¥108.786 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.03% to ¥108.75 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone ahead of Thursday’s monetary policy decision and all-important press conference.

The lack of stats will leave the EUR in the hands of geopolitics on the day. While trade will continue to provide direction, there will likely be an increase in attention towards the UK General Election.

Late today, the FED is also in action, which will influence risk appetite ahead of the ECB press conference tomorrow.

At the time of writing, the EUR was up by 0.01% to $1.1093.

For the Pound

It’s a quiet day on the data front, with no material stats due out of the UK today.

With just one day remaining until the big day, the opinion polls and predictors will be the key driver on the day.

At the time of writing, the Pound was down by 0.14% to $1.3138, with a narrowing in the opinion polls weighing.

Across the Pond

It’s a relatively busy day on the data front. Key stats include November inflation figures that are due out ahead of the FED’s final policy decision of the year.

Following better than anticipated Core PCE Price Index figures for October, today’s inflation figures are unlikely to have a material influence on policy.

According to the FED’s preferred inflation measures, the annual rate of inflation stood at 1.3%. There’s some way to go before the FED needs to manage any inflationary pressures…

On the monetary policy front, while the FED is not expected to make a move, the FOMC economic projections will garner plenty of attention.

FED Chair Powell had talked up the U.S economy of late. It remains to be seen whether all of the Committee members have the same view.

NFP numbers from last week were positive, but private sector PMIs were not… Expect any downward revision to growth forecasts to drive demand for the safe havens…

At the time of writing, the Dollar Spot Index was up 0.09% at 97.496.

For the Loonie

It’s another quiet day on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Expect the EIA’s crude oil inventory numbers, OPEC monthly report, and any chatter from the U.S and China on trade to influence on the day.

Recent stats from Canada have raised red flags suggesting that trade terms will need to improve for the BoC to avoid having to make a move.

The Loonie was down by 0.04% to C$1.3235, against the U.S Dollar, at the time of writing.

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