Yellen quiet on growth
The GBP pressed steadily back upwards against the EUR during the course of the day yesterday and has started to approach the kind of higher levels that we saw in the midst of the Greek crisis. As we open today the gains from the last 24 hours are around a cent. The GBP had a far choppier session with a significant afternoon spike which then reversed and settled back down to end the day on much the same level as it began.
All eyes were on the Fed yesterday evening, with market participants keen to see what rhetoric would came out of the Federal Open Market Committee (FOMC) statement. There had already been whispers of possibly two rate hikes this year, and any suggestion that there isn’t an initial increase in September could well disappoint dollar bulls.
Yellen provided a very carefully crafted analysis, indeed leaving the option open for a September rate rise, but not promising anything just yet. Key factors were around the issue that there have been solid gains in the labor market and declining unemployment. However, there is still a requirement for “some further job market improvement.” We will now have to look towards the minutes released in August for further clues.
In the meantime the focus can be shifted back to economic data. The first being Preliminary US GDP out later today. This is likely to show the growth rate rebounded to 2.6%, from the 0.2% fall seen in Q1 – possibly offering some USD strength during today’s trading.
Chinese stocks finally had some relief as the news of the bright picture painted for the US economy added some support to their numbers. The global risk indicators are easing and this is only positive for China, as well as the trade buoyancy that accompanies strong economic performance of a key trading partner.
Today in the news we have some broad sentiment indicators from the Eurozone, covering Consumer Confidence, Industrial Confidence and Business Climate. Then we are looking for US Gross Domestic Product figure and Trade Balance. Then later we have GBP Consumer Confidence and a slew of Japanese data, including Consumer Price Index, jobs data and household spending.