US Fed talks down USD, US inflation rates due on Friday
ByArnaud Masset
Dovish comments from the presidents of the St. Louis and the Minneapolis Federal Reserve Banks have pushed down the US dollar slightly, while forex markets in general loll about in a summertime lull.
James Bullard, President of the St. Louis Fed, said yesterday that the USA’s prime rate need not be raised in the near term. “The current level of the policy rate is likely to remain appropriate over the near term," he said at a speech in Nashville. Neel Kashkari, Bullard’s counterpart in Minneapolis, contended in a speech at Sioux Falls that the Trump administration’s efforts to limit immigration will reduce economic growth.
The comments helped the Euro bounce back to 1.1824 USD early Tuesday, after dipping last Friday as low as 1.1728. USD/JPY trimmed gains and stabilised at around 110.50, unable to gain upside momentum.
US inflation figures for July are due for release on Friday. After the publication of a rather mixed personal expenditure indicator for June on August 1st, investors are impatiently awaiting July’s Consumer Price Index. Economists have turned slightly more optimistic, with the headline gauge expected to come in at 1.8% year on year, up from 1.6% in June, while the core gauge should remain flat at 1.7%.
Otherwise the week has seen a slow start, with most currency pairs trading sideways. The exception is the New Zealand dollar, which experienced a sell-off on Monday amid a drop in inflation expectations. The Royal Bank of New Zealand is holding its August meeting tomorrow, so a downside move in NZD/USD cannot be ruled out.
Chinese renminbi to weaken further against USD
By Yann Quelenn
The CNH has retreated against the USD to levels last seen in October 2016, and its decline is expected to continue, given China’s falling exports.
July exports for the Middle Kingdom came in at 7.2% year on year growth, well below the market’s expectation of 11%. True, exports tend to slow in the summer, but this year’s slowdown is earlier than usual.
China’s trade balance increased in July to $46.7 billion, higher than the expected $45 billion. The economy continues to transition from mostly manufacturing to a broader base that includes domestic demand.