Clarida’s Confessions:
The Dollar continued its rampant appreciation this morning following the testimony of the Federal Reserve’s Vice Chairman, Richard Clarida. In the first major speech of his appointment, the American economist sided with further US monetary policy tightening. The Vice Chair did not appear concerned by equity market evolutions in the previous weeks despite the aggressive admonitions and deriding comments by President Trump. The Chair and Vice Chair of the Fed appear to be wholly aligned, paving the way towards less accommodative monetary policy that promises to afford the Dollar greater value. The Vice Chair also followed his premier Jay Powell in distancing the Federal Reserve from politics and the White House maintaining that the Fed’s only “job is to sustain what is a very healthy and robust economy”. US Gross Domestic Product data released this afternoon for the third quarter of 2018 surprised to the upside. The recording came in at an annualised 3.5% versus consensus expectations of 3.3%. The reading did, however, still underwhelm the previous figure of 4.2% growth. The data is also used to produce a GDP deflator, a proxy or alternative statistic for the more popular measure of inflation, the Consumer Price Index. This figure surprised to the downside, underwhelming market expectations by a whole 0.4%, causing a sell off in the Dollar throughout the afternoon. Given the principal and superior importance of inflation to monetary instruments and interest rates, this statistic overwhelmed the market effect of the more popular growth measure. Cable recovered from lows of 1.2775 to comfortably trade within the 1.28s at market close. The Euro was also able to recover pivotal ground above 1.14, surpassing important resistance.
Discussion and Analysis by Charles Porter
Japanese Yen With JPY at a new 34 year low versus EUR, the market is set for an ambush by the Bank of Japan if it acts today at the end of their Policy Meeting to support the Yen. The reason that the market is susceptible is because it has convinced itself that the BoJ […]
Too soon to call USD lower Those following the US Dollar’s performance in the markets would have noted a recent downturn accelerating as this week has progressed. There have been two factors driving this sell-off but it is far from certain that either may endure long enough to push the Dollar index back to its […]
Milan, Italy The City of Milan has a late night noise problem and so it has acted unilaterally to resolve it-Italian style. A ban on the sale of take away food including ice cream and pizza after midnight is being imposed to protect the “peace and health of residents.” Here in the UK late night […]