Concern Grows About the State of the US Economy as US Data Falls Short

Daily Analysis - 15/08/2016

US Data Performed Poorly, Missed Targets


All four of the major US data that was released missed expectations on Friday. The FOMC meets in September to discuss the subject of weather change the interest rates or to leave them as is. With the results of poor GDP data last month and the weak data from Friday will put a damper on the chances of a rate hike, even with the bullish data being released from last month’s nonfarm payrolls.

EURUSD Gaining Ground as US CPI Underperforms

US CPI and retail sales numbers were miserable on Friday as Core Retail Sales sank 0.3%, while Retail Sales dropped to a flat 0.0%. The US PPI data also fell short of expectations with a rate of -0.40%, and Core PPI slipped 0.30%. The PPI readings point to ongoing low inflation levels, well below the Federal Reserve's target of about 2.0%. EURUSD gained 0.27% right after the cluster of bearish data was released hitting a daily high of 1.1221.


The Pound Crosses Benchmark Level Only to Retreat Back Down

The Sterling posted early gains on Friday during the US session after the release of poor US data but finished the day with disappointment. GBP/USD crossed over the benchmark 1.30 level after the US Core CPI data was released but ended the day back down at 1.28174. The main culprit for the decline at the end of the US session was the UK release of the Construction Output which fell flat reporting a decline of -1.20% when a forecast of -0.90 was predicted. This is a major predicament of BoE Governor Mark Carney, who just implemented his first rate change of his three year tenure. Mr. Carney has to contemplate that another rate hike c by the end of the year might be required for the BoE to continue to soften the blow of the negative impacts of the Brexit.


More Poor Data in China as Data Indicates Lack of Consumer Confidence

Very disturbing data has been released today from China as the country’s consumers and business are taking out less loans. The China New Loans data released on Friday showed that outstanding bank loans sank to 463.6 billion dollars opposed to 800 billion in forecast and 1.38 trillion reported the last month. Even through less outstanding bank loans sounds like a good thing, it actually reflects poor confidence from the local consumers. The China New Loans data this month is congruent with the PMI data that was released last month when the PMI sank below 50.0, indicating contraction.


Japanese Preliminary Q2 Data Misses Target

The Yen has had a rocky Monday morning after it released sub-par GDP data for the preliminary release of its second quarter. The GDP for the second quarter has been reported flat at 0.00% when a forecast of a slight increase of 0.20% was predicted. After the release of the Japanese GDP, the greenback gained 0.06%, reporting at 101.33. The Yen recovered later in the session following the well-needed bullish data regarding the results of Industrial Production in July. Production in the Japanese industrial sector spiked a 2.30% output compared to its forecast and previous rate of 1.90%. This report has created normalization between the USDJPY pairing for the intra-day trading as the pairing as of 8:45 GMT reporting no change from the opening bell.


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