Increasing number of Fed officials support rate hike

Daily Analysis - 30/08/2016

Cleveland Fed governor Mester, latest to speak in support of rate hikes

After the hawkish comments from the Federal Reserve governor Janet Yellen sent the dollar higher and brought ahead the rate hike expectations, the latest FOMC voting member to join the hawkish camp was Cleveland Fed governor, Loretta Mester. During her speech at Jackson Hole and in an interview with the Financial Times thereafter, Mester said that the Fed was about there in reaching one of its dual mandates. She said that the data supported the view of normalizing interest rates.

New home sales in Australia plunge in July

Sales of newly constructed dwellings fell in July, data from Australia's Housing industry association showed on Monday. The HIA's new home sales data fell to a seasonally adjusted 9.70% on a month over month basis reversing the 8.20% increase recorded in June. New home construction was one of the primary drivers of the Australia GDP but has come under pressure as the business cycle is expected to take a downturn. Low interest rate from the Reserve Bank of Australia has helped many first time buyers, but the effects seem to be waning as far as new home sales are concerned. In the short, outlook for new homes in Australia remains healthy for most of 2016 but is expected to slide next year.

Retail sales in Sweden decline for the second month

Sweden's retail sales fell for a second straight month in July and marking a fastest pace of declines since December last year. Data from statistics Sweden showed on Monday that retail sales fell to a seasonally adjusted 0.90% on the month in July after slipping 0.70% in June. The decline in retail sales for July was only second to a one-percent fall in retail sales in December last year. On a working-day adjusted basis, retail sales were seen rising 1.10% on a year over year basis which was still lower from the 3.90% yearly increase posted in June. The pace of increase was also the slowest since May this year.

US personal income and spending rises as expected

Personal income and spending in the US increased in July matching estimates. Data from the US commerce department showed on Monday that personal income increased 0.40% in July, extending from the 0.30% increase in June. Personal spending increased 0.30% in the same period, but was slower than the 0.50% increase in June, but the data matched economic expectations. Real spending adjusted for price changes increased 0.30% on the month. The personal consumption expenditure slowed to 0.80% in July down from 0.90% on a yearly basis but core PCE increased 1.60%, beating estimates of 1.50%, rising at the same pace as the month before.

German inflation data on tap

Monthly inflation figures from Germany are expected to be released today at 1200 GMT. Economists forecast that consumer prices rose at a yearly rate of 0.40% on a month over month basis in August, maintaining the same pace of gains from July. On a month over month basis, German inflation is expected to slow, with forecasts of only a 0.10% in August, after consumer prices increased 0.30% in July. The HICP, used to measure inflation in the eurozone is also expected to rise 0.40%, unchanged from the previous month. Germany's inflation data is only a preliminary reading but could play a role when the ECB meets next week.