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US data failed to impress

  • The Housing Data plunged 11.2% ahead of preliminary Q4 GDP
  • Fed’s Chief Powell said this Tuesday that the Fed must be patient about further policy firming
  • The increasing concerns over global growth have a big influence on the US financial market
  • This Wednesday, the US will release December Trade Balance, January Durable Goods Orders, and Pending Home Sales
  • Brexit-related headlines are still dominating the financial markets
  • The EU officials are considering the option to delay Brexit until 2021

The latest US macroeconomic data disappointed and all major currencies benefited from dollar’s weakness. The Housing Data plunged 11.2% but it is important to mention that the building permits were modestly up although this didn’t have to much influence on the USD. Fed’s Chief Powell said this Tuesday that the Fed must be patient about further policy firming and the rates could go in “either direction” in the upcoming period. Chief Powell repeated once again that the US economy remains strong but the main reason why the case for raising rates has “weakened” is the trade war, Brexit and slowing growth in Europe and China. Some Fed members also warned that economic growth in the US could slow this year and these comments put the further pressure on the greenback. In my opinion, there is still no reasons to panic but the slowing economic growth in other major economies will certainly have a negative influence on the US. Chief Powell also said that the Fed will overcome its current reticence and hike rates 25bp during the summer in an environment of rising inflation pressures, rising economic performance and decreasing trade concerns. The US still performs very well in terms of inflation and growth, the US released inflation data for January 2019 and the inflation rose 1.6% YoY. This is very important because some estimates predict that the US potentially faces a mild recession in 2020.

Trade talks between the US and China will continue but the policymakers from both countries agreed that progress has been made. According to the latest news, the deal is just a matter of time and this is also positive for all other major economies. It is also important to mention that Brexit-related headlines are still dominating the financial markets. According to some rumors, the EU officials are considering the option to delay Brexit until 2021. The EU Chief Negotiator Juncker and the UK Prime Minister had a meeting last week and both sides will continue to explore options in a positive spirit. Some rumors also say that Theresa May should stand down after the local elections in May and let the next phase of Brexit negotiations be handled by a new Prime Minister. The Pound is advancing on new hopes for delayed Brexit and this news pushed the US dollar lower in an uneven manner across the board.

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