The Federal Reserve has not been this unpredictable for a long time. However, markets are increasingly leaning towards a larger cut. Good data from the USA allows for more conservative moves indeed. The question arises, will the FED want a stronger move before the elections?
Data from the USA
Yesterday’s data was a pleasant surprise for the market. Analysts expected a monthly decrease in retail sales of 0.2%. However, they received a 0.1% increase. They also expected a monthly increase in industrial production of 0.2% – they received 0.8%. The readings are objectively good. Data that should noticeably strengthen the dollar against the euro. Looking at the chart, however, the move was short and not particularly impressive, to say the least, that in the long-term perspective it is unnoticeable. The reason is expectations concerning Thursday’s FED decision.
Waiting for Thursday
Quite unexpectedly, we have shifted in expectations regarding the September meeting of the FED – which dominated just a few days ago – to expectations of a 0.5% cut from 0.25%. What is strange is that it is not entirely clear why. It is certainly not macroeconomic data, as yesterday’s good results should rather distance rate cuts. If it’s so good, the economy is not choking on expensive credit. There is also a matter of a letter from the Democratic senators to the FED. On one hand, it is quite a strange form of pressure, on the other surprisingly substantive for such letters. Of course, Democrats would benefit from lower rates in the campaign, as well as credit cost cuts. However, the example of Poland shows that this is not always enough to maintain power. It seems that currently, the prices include more and more of the cut to 0.5%. If there was the previously expected 0.25% we could expect a noticeable strengthening of the dollar.
Inflation on the British Isles
This morning we learned two important readings about prices in Great Britain. Consumer inflation – consistently for the second month in a row – is at the level of 2.2%. This is a level that allows the Bank of England to continue its policy of interest rate cuts. Another good news is the rapidly falling producer inflation. Analysts expected a decrease from 0.8% to 0.5%. The final reading was 0.2%. This means that the pressure on price increases from producers should decrease. This only confirms that Great Britain should continue the policy of interest rate cuts.
Today is a day off in China and Japan, and in the macroeconomic data calendar it is worth paying attention to:
2:30 PM – USA – Real Estate Market data,
8:00 PM – USA – Interest Rate decision.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://ceo.com.pl/fed-nieprzewidywalny-jak-nigdy-dotad-czy-fed-bedzie-chcial-mocniejszego-ruchu-przed-wyborami-38513
