The Fed is facing moderate growth in the U.S. and the timing of its
next interest rate hike will be affected by the ongoing presidential
electoral campaign. The Federal Open Market Committee (FOMC) meeting in
July due to not featuring a press conference following the release of
the statement had always been an unlikely candidate. The September
meeting has 20 percent probability and the last meeting of the year on
December 14 has over 50 percent with the added benefit of not
interfering with the presidential elections.
The Federal Open Market Committee (FOMC) statement will be released
on Wednesday, July 27 at 2:00 pm EDT. There is no change expected to the
Fed benchmark rate and since this monetary policy meeting is not
followed by a press conference the language in the statement will be the
main focus as analysts try to gleam insight from the document.
The EUR/USD has lost 0.035 in the past 24 hours. The single currency
is trading at $1.0990 after the U.S. dollar received a boost from the
consumer confidence data released by the Conference Board. The household
survey showed an improvement in consumer confidence up to 97.3 well
above the forecast and inline with the past month’s print despite the
The Fed is not expected to make the first move as other central banks
have more mounting pressure to act. The USD would gain from further
easing from Europe, Japan or the United Kingdom. The European Central
Bank (ECB) held interest rates and its quantitive easing (QE) on hold as
expected on Thursday, July 21. The EUR is weaker against major pairs
after there was not clear signal on what the next step for the central
bank is despite the anticipated negative effect of the Brexit vote on
European growth by forecasters.
The Fed has been forced to relive 2015 where more was expected from
the market but in the end only one rate hike materialized. The U.S.
economy continues to be the one that is growing at a slow but steady
pace in comparison to other major economies battling deflation.
The USD will be directly impacted by the language used in the FOMC
statement. Investors will be going through the documents trying to get
insights on the Fed’s view on the jobs market, inflation, growth and
global events. Another point to consider is the vote split. Kansas City
Fed President Esther George dissented in March and April but rejoined
the hold camp in June. Given the positive signs form the U.S. economy
and the limited impact of the Brexit shock she might once again push for
a rate hike in July breaking rank with the rest of Fed FOMC voting
US June durable goods orders -4.0% vs -1.4% expected
Durable goods orders for June
Prior was -2.3% (revised to -2.8%)
Ex transportation -0.5% vs +0.3% expected
Prior ex transportation -0.3% (revised to -0.4%)
Non-defense capital goods orders ex-air +0.2% vs +0.2% exp
Prior non-defense capital goods orders ex-air -0.4% (revised to -0.5%)
Capital goods shipments nondefense ex air -0.4% vs +0.4% exp
important number is non-defense capital goods orders ex-air and it was
bang-on expectations so this isn't as bad as the first headline looks.
However, the shipments number is soft and that will be a drag on Q2
Personal consumption 4.2% vs 4.4% exp. Prior 1.5%. Revised to 1.6%
PCE 1.9% vs 2.0% exp. Prior 0.2%. Revised to 0.3%
Core PCE 1.7% vs 1.7% exp. Prior 2.0%. Revised to 2.1%
GDP sales 2.4% vs 3.2% exp. Prior 1.3%
Employment costs 0.6% vs 0.6% exp. Prior 0.6%
Wages 0.6% vs 0.7% prior
Benefits 0.5% vs 0.5% prior
GDP deflator 2.2% vs 1.8% exp. Prior 0.4%. Revised to 0.5%
Exports 1.4% vs -0.7% prior
Imports -0.4% vs -0.6% prior
Ouch on the headline. Consumer spending near expectation may save this report from being an outright stinker.
it's a bit of a mixed bag. The headline is way off expectations but
consumer spending rose and prices held up, even taking into account the
drop in the core. It's another sign that the US economy has many
different levels and they're not all pulling in the same direction.
was better in Q2 but structure investment was very poor in both
residential and business sectors. Residential fell 6.1% vs 7.1% prior,
business -7.9% vs 0.1% in Q1. Government spending fell 0.9% from its
1.6% gain in Q1.
Durable goods took up the baton for the jump in spending.
Confidence among America's shoppers worsened in July, a private
survey confirmed on Friday, pointing to waning household confidence in
The Thomson Reuters/University of Michigan
final Consumer Confidence Index fell to 90.0 points during the seventh
month of the year, down from June's final print of 93.5, when it stepped
down from a one-year top.
A preliminary print showed the gauge at 90.4, missing original estimates that had pointed to an unchanged reading in July.
"Our analysis...seems to support the thesis that while lending is extending to riskier consumers, the finances of those consumers are not materially improving. The recipe is likely to result in consumer delinquencies that will not fall in coming quarters, consistent with our broader thesis that the credit cycle is in the later innings."
tad softer on the headline and employment slipping once again is not
good news. New orders held up well enough though. USDJPY dropped a few
pips to 102.21from around 102.35 but has recovered all that back. It
seems there's little interest still.