Spreadex Market Update

Weak US inflation and retail sales readings causes some pre-Fed jitters



The US inflation and retail sales readings threw a spanner in the works this afternoon, undermining the case for a Fed rate hike just as Janet Yellen and co. are gearing up to pull the trigger.

The consumer price index contracted by 0.1% in May, down from the 0.2% growth seen in April, while the retail sales figure fell from 0.4% to -0.3% month-on-month. Both were far worse than forecast and combined with the weak first quarter GDP reading suggest that the US economy isn’t faring too well under the Donald Trump’s near non-existent leadership.

"Understandably the dollar wasn’t best pleased with all this; cable reversed its wage growth-inspired losses to briefly surpass $1.28 for the first time since the election, while the euro and yen took 0.7% and 0.9% off the greenback respectively."

It is unlikely that this data-slump will halt the Fed’s long signposted rate hike this evening. However, it may cause the central bank to strike a tone far less hawkish than initially planned, something that in turn could delay a potential interest rate increase in September.

Understandably the dollar wasn’t best pleased with all this; cable reversed its wage growth-inspired losses to briefly surpass $1.28 for the first time since the election, while the euro and yen took 0.7% and 0.9% off the greenback respectively. Even the Dow Jones wasn’t impressed; the US index initially started the session at a fresh all-time high, only to settle into some pre-Fed flatness soon once the clamour of the open had receded.

Elsewhere the pound’s gains against the dollar – sterling is still down 0.4% against the euro, meaning cable’s climb is very much coming from the US side of things – erased most of the FTSE’s growth, leaving it just above 7500. As for the Eurozone, the DAX sat a handful of points away from an all-time high after jumping half a percent (it actually smashed through 12900 for the first time earlier in the day) while the CAC saw a less enthusiastic 0.1% rise.

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