Tuesday 22 October 2019

Ulster Bank Markets Daily Top Three

The US Federal Reserve. Photo: PA
The US Federal Reserve. Photo: PA

Jason Rehill

Fisher and the Fed

Yesterday saw a continuation of the recent dollar rally after Fed Vice Chair Fischer spoke on Bloomberg TV.  The interview was certainly interesting and he said the US job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing though he did not comment on the timing of the next Fed rate hike. He further added that negative interest rates seem to be working in other countries, while reinforcing that they aren’t on the table in the US. In the currency markets EURUSD and GBPUSD were lower but the big mover was USDJPY which saw a move from 101.90 at the open yesterday to 103.27 this morning, up over 1% on the day

Recapping on yesterday’s Euro Area, UK and US economic data

The final reading of Euro Area consumer confidence for August the last piece of important soft data for the month came in at -8.5, unchanged from the preliminary release. Consumer confidence remains well above the long-term average of -12.3, calculated since the start of the series in 1985. In the UK the Bank of England data released yesterday mirrored the move in the British Bankers’ Association numbers from earlier in the month, as mortgage approvals fell by over 5% to 60,912 in July. Whilst in the US Home prices climbed more than 5% in the last 12 months, almost double the 2.7% increase in real personal incomes. Further, US consumer confidence showed an impressive increase in August, reinforcing the notion that household spending will support overall economic growth through the second half of the year. The headline number rose to 101.1 in August from 96.7 prior, handily exceeding consensus’ expectations for a little-changed 97.0.

Eurozone Inflation release and US ADP employment ahead of Friday’s Non-Farm Payrolls in focus

Yesterday’s German flash inflation figures for August were weaker than expected. The national measure came in at 0.4% year on year, below the Bloomberg consensus of 0.5% year on year and unchanged from July’s outturn (in spite of energy price deflation unwinding, broadly as expected). Given the weak German numbers yesterday, Eurozone CPI may also undershoot expectations. The consensus forecast is for 0.3% year on year however risks are to the downside. Similarly there are risks at the core level – the Bloomberg consensus is currently for 0.9% year on year however after the German figures yesterday (including weaker services), the core rate is possibly more likely to come in at 0.8% year on year. In the US, the ADP employment change at 1.15pm will be closely watched ahead of Friday important US employment report and Non-Farm Payrolls release.

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