Dollar Under Pressure as FOMC Looms

Daily Analysis - 16/03/2016

US Fed Meeting, Consumer Inflation, Housing Data Weighing on Dollar

It will be a busy day for the US Dollar as inflation, housing starts and building permits data is expected to be released during the US trading session. The Federal Reserve will also be releasing its new economic projections along with a press conference hosted by Federal Reserve Chair, Janet Yellen.

Sweden Inflation Increases for the Sixth Straight Month

Consumer inflation data from Sweden released yesterday showed an increase of 0.30% for the month of February, above the forecasted 0.20%, while inflation measured over the year increased by 0.40%, beating forecasts of 0.30%. On core inflation, Sweden's CPIF increased 1.50% year over year and 0.20% on a month over month basis edging closer to the Riksbank's projected inflation target. However, the central bank is likely to continue with its bond purchase program into the second half of the year in order to put a lid on the SEK's appreciation against the Euro. Clothing and footwear prices were the biggest contributors adding 0.30% points to the CPI on a month over month basis.

US Wholesale Price Index Muted in February

In the U.S., wholesale inflation was muted in February as declines in food, energy and trade margins offset upward price pressures in the economy. The producer prices index declined 0.20% in February compared to the 0.10% decline that was forecasted and a 0.10% increase in January, according to latest reports released by the US Department of Labor. Food and energy prices declined sharply adding deflationary pressure to the index. Retail sales data was also disappointing as the retail sales control core for the month showed no growth at 0.0%, coming in below forecasts of 0.20%. Last month's numbers were revised lower from 0.60% to 0.20%, while the headline retail sales declined -0.10% as expected with previous month revised lower from 0.20% to -0.40%.

UK Wages Expected to Rise 2.1%

The monthly employment report from the UK’s Office for National Statistics is due for release today at 09:30 GMT. Average earnings are expected to show an increase of 2.1% excluding bonuses while an increase of 2% is expected on average earnings including bonuses. This follows last month's slower pace of increase in wages at 2% and 1.9% respectively. On the unemployment rate, forecasts point to the monthly unemployment rate staying unchanged at 5.1% following the increase from 5% in December. Overall, the labor market report is expected to show a moderate improvement and if the actual data beats estimates, it could impact UK's inflation which has remained consistently lower

Big Day for the US Dollar

The US markets will see a big day for important economic data today ahead of the Federal Reserve's monetary policy meeting later. US consumer inflation for the month is expected to show a decline of 0.2% on the headline print on a month over month basis, while core inflation is expected to rise 0.1%. Inflation forecasts are bearish following last month's surprise increase in core inflation to 0.3%. On an annualized basis, core inflation is expected to rise at a moderate pace of 2.1%, down from 2.2% the previously month. Housing starts and building permits will also be released at the same time with expectations of a 4.5% increase on the housing starts and -0.1% decline on building permits on a month over month basis. Few hours later, the FOMC meeting's policy statement will be released followed up by a press conference from Janet Yellen. US Fed funds rates is expected to remain unchanged at 0.25% - 0.5%.

Upcoming Events

Time
Currency
Event
Forecast
Previous

09:30 GMT
GBP
UK unemployment rate
5.10%
5.10%

12:30 GMT
USD
Housing starts m/m
4.50%
-3.80%

12:30 GMT
USD
CPI m/m
-0.20%
0.00%

14:30 GMT
USD
DoE Crude Oil inventories
2.9M
3.9M

18:30 GMT
USD
FOMC Press conference

12:45 GMT
NZD
GDP q/q
0.70%
0.90%

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