Markets Await FOMC Meeting Minutes

Daily Analysis - 17/08/2016

Minutes from July FOMC Policy Meeting Will Be Released Today


Investors will be closely scrutinizing the FOMC meeting minutes which will be released later this evening. The minutes are from the July FOMC policy meeting where interest rates were left unchanged at 0.50%. In July, Kansas City Fed President Esther George was the lone dissenter who voted for a rate hike in July. Following a string of weak economic reports with July payrolls being the only exception, market participants are seen scaling back their expectations for a September rate hike.

Consumer Price Index in UK Accelerates On Weak British Pound

Inflation in the UK accelerated to 0.60% on an annual basis, beating estimates of 0.50%. Data from the statistics showed that consumer prices surged to their highest level since 2014. The inflation data covers the period of July, marking one full month of data after the UK voted to leave the EU in late June. ONS statisticians however said that there was no obvious impact on the headline inflation from June. Excluding food and energy components, the UK's core CPI was unchanged at 1.30% on a year over year basis.


Eurozone Trade Surplus Falls In June

Trade surplus in the euro area decreased unexpectedly in June, data from Eurostat showed on Tuesday. On a seasonally adjusted basis, trade surplus was recorded at 23.4 billion in June. This was lower than the 24.6 billion in trade surplus recorded in May and lower than the median forecasts of 25.3 billion. On a month over month basis, exports climbed 0.50% in June, while imports surged 1.50%. Yesterday the ZEW economic sentiment for the Eurozone and Germany showed a strong recovery. In the Eurozone economic sentiment index increased to 4.6 from -14.7 in July.


US Consumer Prices Were Flat in July

The Consumer price index in the US was flat in July on lower gasoline prices, which offset modest gains from elsewhere. Data from the US labor department released on Tuesday showed that headline CPI was unchanged in July, matching analyst expectations following a 0.20% increase in June Compared to a year ago, inflation was seen at 0.80% on the headline and 2.20% on the core. Energy prices were down 1.60% while gasoline prices fell 4.70%.


Looking Ahead: UK Unemployment Rate Expected at 4.90%

The UK's labor market report is expected to be released at 0830 GMT today. Analysts are expecting to see unemployment staying unchanged at 4.90% in July and are bullish on average earnings - forecast to rise 2.50% in the three months ending in June. The unemployment report is unlikely to bring any surprises although wages need to keep up pace with rising inflation, which as of July stands at 0.60%. With producer prices showing a sharp increase it is quite likely that consumer prices will also continue to rise over the next few months.


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