The week has been data packed to say the least for the US dollar highlights included inflation Data, retails sales figures and the small matter of an all but certain US interest rate hike.
The dollar data began to come along thick and fast over the last few days Wednesday saw the US economy miss a host of projected data figures.
Wednesday’s US economic data
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The first release came in the form of Consumer Price Index. The data was anticipated to reach 0.2% however the figure contracted reading -0.1%. Previously the weakening CPI figures which have missed expectation in the two-last readings have been branded as ‘Transitionary’ due to geo political event however policy makers will hope that this reverses itself sooner rather than later, especially as it now rising at its slowest since mid-2015.
Retail sales
Following the US’s consumer price index figures saw the release of the US retail sales which as per the inflation data disappointed. Showing a reduction of -0.3% US retail sales fell at the sharpest rate since January 2016.
Washington Post scandal weighed further on the Dollar
In tandem with the weak data saw the break of a story about Robert Mueller lll who is looking in to whether Donald Trump may have obstructed justice during the yearlong enquiry relating to electoral interference with Russia. It is also believed they are looking into allegations of financial crimes.
US interest rate hike
The evening saw the much-anticipated rate hike which saw US interest rates raised from 1.00% to 1.25%. although this action had been priced into US Dollars to Pounds rate all eyes were on the minutes to see what tone was conveyed.
The tone of the minutes was as bullish as we could have expected and even went as far as to discuss the planned reduction of US balance sheet. The emphasis being on actively reducing the 4.2 Trillion of Bonds and securities at a predicted rate of 10 Billion per month. Many envisage the process will begin as early as September.
Janet Yellen did her best to dress up and explain recent poor data stating that she expected inflation to remain low during the transitionary period. She did however highlight the US’s strong labour market. A message which was reinforced the next day.
Thursday’s US economic data
US manufacturing data
Thursday saw the release of Both the Empire State Manufacturing index and the Philadelphia FED Manufacturing. Both exceeding expectation and following on nicely from Wednesday’s rate hike.
Firstly markets saw the release of the Empire State Manufacturing Index which exceeds projected levels reaching 19.8 vs a target of 5.2.
The Philadelphia Fed numbers didn’t hinder the sector either reaching 27.6 vs 25.5, comfortably exceeding expectations.
US unemployment reduced
However, these two data releases were far from a main event and followed the days key data. Unemployment claims had been projected to reach 241,000 however the results were better than expected showing 237,000 claimants endorsing Janet Yellen’s message about the strong labour market driving the US economy.
How has the US Dollar reacted leading up to and post rate hike?
Naturally with both retail sales number and inflation setting a terrible stance from the middle of the week. The interest Rate hike and positive tone from Yellen only really assisted in consolidating losses.
Over the week we saw the Dollars to Pounds Rate trade between a range of 1.2642 and 1.2806 with many of the Dollars to Pounds Rate gains being quelled by the Bank Of England vote on rate hikes which saw 3-5 in favour of an interest rate hike, previously 1-7; Therefore enforcing Mark Carney previous message that a UK interest rate hike could be quicker than expected.
