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FOMC Statement Analysis
Aug 5, 2008
As widely expected, the FOMC held rates steady at 2% today.
The key to today's meeting was the statement released along with the decision.
1. They omitted the phrase in June's statement that indicated risks to growth appear "to have diminished somewhat."
Clearly, they are reacting to recent turmoil surrounding Fannie Mae, Freddie Mac, and Lehman Brothers. As I suggested earlier this week, the FOMC is chiefly concerned about liquidity, not inflation.
2. Their was only one dissenter, Dallas Reserve President Richard W. Fisher.
Leading up to the meeting, their had been some speculation that Philly Reserve President Charles Plosser would join Mr. Fisher's dissent. I believe we will see the dissent count rise to 2 or 3 in a meeting before the Fed finally does raise rates. As such, we are at least 2 meetings away from Fed rate hikes.
However, readers should remember that Frederic Mishkin will be stepping down at the end of this month. It will be interesting to see how the dynamic of the Board plays out as Elizabeth Duke essentially replaces the departing Governor.
3. The committee stated "the Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."
That is pretty clear. Like many other central banks, the FOMC expects a slowdown in the economy to reduce inflation risks, without an increase in rates. However, the geopolitical concerns behind recent oil pricing makes this expectation uncertain.
So how does the US Dollar perform for the remainder of the week?
I think many traders had already bought into the notion the Fed was to be dovish today, and were thus not disappointed.
Across the Atlantic, news continues to sour for the UK and Euro-zone.
Today, the Nationwide survey of UK consumer confidence fell 11 points to 51. Year over year, that is a 46% decline in confidence, the steepest drop in the history of the report. And, industrial output fell to an annual rate of -1.6. In the Euro-zone, retail sales hit -3.1% today, and PMI slipped further into contraction at 48.3 for July.
For Thursday, Trichet and the ECB are unlikely to make hawkish statements. They are more likely to take a page from the FOMC and warn of downside risks with the expectation inflation will soften over the next few quarters on a weakening economy.
Their is a growing chance the Bank of England will signal a rate cut in their statement.
Given that forex markets have been dealing with a weak American economy for several months, the rapid slowdown across Europe and other parts of the world will probably play a bigger factor in trading action over the next few weeks.
Bank of England, European Central Bank, inflation, interest rates, FOMC, USD
Quotes to Note
Jul 8, 2008
Some days we need to listen to comments rather than read reports.
In Europe, ECB vice president Lucas Papademos, who received a PHD in economics at MIT 1 year before Fed Chairman Bernanke, struck a balanced tone between on inflation and growth. "We are witnessing a period of rising inflationary pressure, moderating growth and continued tensions in the financial markets."
Mr. Papademos comments were echoed by German and Belgian Finance Ministers.
German Finance Minister Peer Steinbrueck stated "It (inflation) will have a negative impact on domestic demand and therefore also on the economy...(but) The economic clouding in Germany and in many other countries will obviously result in a certain counter effect to inflation."
Belgian Finance Minister Didier Reynders stated "We are more focused on the next weeks and months....to pay attention also to growth and not only to inflation"
Europe may have turned a corner, as these comments suggest they are now trying to balance inflation AND growth concerns.
French Finance Minister Christine Lagarde, who for the past few months has chided Trichet and the ECB for their singular inflation focus, must be pleased.
Meanwhile, back in the states, Richmond Fed President Jeffrey Lacker struck a particularly hawkish tone. Speaking at the National Economic Club, he made a number of key statements.
"It could happen that we find it necessary to raise rates even if unemployment is still rising and growth is weak...It's something we need to be prepared to do."
"While the risk of an acute near-term downturn has not entirely disappeared, it has diminished substantially"
And perhaps most importantly, Mr. Lacker noted that the personal consumption indicator (PCE) was running at 3.9% over the last 3 months and that "for several years I have suggested an inflation target of 1.5 percent"
Sounds like Mr. Lacker will be voting for a rate hike sometime this fall.
On the flip side of that coin though, Fed Chairman Ben Bernanke indicated that the central bank may keep the emergency lending facility open through the year.
Would the Fed really raise rates (and thus extend an economic slow down) if they are lending money to investment banks? While that is unlikely, rate changes usually take 6 - 9 months to take full effect. And, as evidenced by Mr. Lacker's comments, a stronger dollar may reduce import prices and thus help economic growth.
inflation, finance minsiter, Lacker, comments, Papademos
ISM Boosts Greenback, Portends NFP Drop?
Jul 1, 2008
The ISM beat market expectations today, as PMI came in at 50.2 vs 48.0 expected.
The last time the report came in above 50 (the line between contraction and growth) was January 2008.
Markets reacted positively, with the DJIA up around 100 pts. The market had started the short trading week down 160 points.
The sentiment carried over to the currencies, as the Pound dropped below the 2.00 rate reached overnight.
Market participants would be wise to take caution with this report. Prices are up sharply - since October 07 the report has risen from a reading of 63 to 91.5. That is by far the largest move in any of the 10 components over a similar period.
Additionally, Employment came in at 43.7, nearly 2 points off May's reading of 45.5. That may spell trouble for Thursday's Non Farm Payroll report. The NFP will be released at 8:30am est, 45 minutes after the ECB meeting. US Average Hourly Earning will be release at the same time.
If the EURUSD is to break the 1.58 resistance that has held sway since March, Thursday seems to be the day.
Table of ISM Data since the markets peaked in October.
| Jun | May | Apr | Mar | Feb | Jan | Dec | Nov | Oct | |
| PMI | 50.2 | 49.6 | 48.6 | 48.6 | 48.3 | 50.7 | 48.4 | 50.0 | 50.4 |
| New Orders | 49.6 | 49.7 | 46.5 | 46.5 | 49.1 | 49.5 | 46.9 | 52.5 | 52.8 |
| Production | 51.5 | 51.2 | 49.1 | 48.7 | 50.7 | 55.2 | 48.6 | 51.3 | 50.1 |
| Employment | 43.7 | 45.5 | 45.4 | 49.2 | 46.0 | 47.1 | 48.7 | 48.4 | 51.8 |
| Supllier Deliveries | 55.1 | 53.7 | 54.0 | 53.6 | 50.1 | 52.8 | 52.6 | 51.5 | 50.7 |
| Inventories | 51.2 | 48.0 | 48.1 | 44.9 | 45.4 | 49.1 | 45.4 | 46.4 | 46.5 |
| Customers' Inventories | 55.0 | 47.0 | 45.0 | 51.0 | 49.0 | 49.5 | 51.5 | 49.0 | 54.0 |
| Prices | 91.5 | 87.0 | 84.5 | 83.5 | 75.5 | 76.0 | 68.0 | 67.5 | 63.0 |
| Backlog of Orders | 47.5 | 46.0 | 51.5 | 47.5 | 45.0 | 44.0 | 43.0 | 41.5 | 46.0 |
| Exports | 58.5 | 59.5 | 57.5 | 56.5 | 56.0 | 58.5 | 52.5 | 58.5 | 57.0 |
| Imports | 46.0 | 49.5 | 48.0 | 45.0 | 47.5 | 52.5 | 48.0 | 47.5 | 47.5 |
inflation, ISM, PMI
ECB: Really One and Done?
Jun 30, 2008
The European Central Bank meets Thursday, July 3rd. For the past month, bank members have been hammering home the point they will raise rates 25bps at this meeting.
But the real pricing action from the meeting will be the commentary. With inflation spreading like wildfire across the globe, can the ECB really be one and done?
On the one hand, it seems very unlikely. Today's CPI came in at 4% (vs 3.9% expected), double their mandated target rate of 2%. And while the German economy has definitely seen growing signs of a slowdown, the data remains mixed across the Eurozone.
French consumer spending remains resilient, coming in at 3.1% YoY. Indeed, French GDP remains inline with expectations, coming in at a steady 2%. Wage growth remains strong in Italy, coming in at a better than expected 3.3%. And that wage growth may be the biggest problem of all for Trichet and the ECB. After all, Trichet has cited a fear of spiraling wage inflation as a reason for this month's presumed 25bps hike.
On the other hand, their is growing pressure for ECB policy change. French President Sarkozy suggested the Euro is 30% overvalued against the dollar. He wisely pointed out that such over-valuation makes it tough for Airbus to compete with Boeing. President Sarkozy's comments echo that of his finance minister, Christine Lagarde. Both have suggested that growth, and not inflation alone, should be a considered in rate hikes.
But the Atlanticist French may be singular in their views.
I'm not suggesting the Europeans will raise rates when they next meet (August 7). But the idea that commodity driven inflation will come down from 1 ECB rate hike is...silly. The Eurozone economy will not come to a screeching halt July 4 and thus offer price relief.
Perhaps the typical post Olympics bust will cool China's appetite a bit, but their GDP is still forecast for 10.3% growth this year. They have plenty of reconstruction needed in the wake of the Sichuan earthquake.
And, political tensions across the Middle East and Africa seem unlikely to ease. Indeed, former UN Ambassador John Bolton has suggested Israel will strike Iran after the US election.
Barring an FX market intervention from the G8 (they meet in full July 7-9), the ECB may have little choice but to resume a rate hiking agenda later this year.
ECB, European Central Bank, inflation, Trichet, rate hike
Australia Hold Rates at 7.25%
Jun 30, 2008
As was expected, the RBA has held rates steady at 7.25%.
Forex traders are reacting quickly, sending the Aussie down against most of the majors. However, midterm traders need to look at this situation with some consideration.
Yesterday, the TD Securities-Melbourne Institute survey estimated an annual inflation rate of 4.8 %. That is well above the target 2-3% range. Commodity demand from China is likely to continue as their economy is forecast to grow by 10.3% this year.
In the policy statement, the bank noted:
"The rise in Australia's terms of trade that is currently occurring will...add substantially to national income and ability to spend, even with the slowing in global growth to below-trend pace that the Bank is assuming. At the same time, rising prices of oil and a range of other commodities are adding to global inflationary risks."
The minutes from this meeting will be very interesting. One has to wonder how heavily the sharp contraction in PMI (down to the contraction level of 47) factored in their decision.
The full statement:
STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY POLICY
At its meeting today, the Board decided to leave the cash rate unchanged at 7.25 per cent.
Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand. In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time.
As a result of earlier decisions by the Board, additional rises in market interest rates and tougher credit standards for some borrowers, there has been a substantial tightening in financial conditions since the middle of last year. Conditions in international financial markets remain difficult, with credit concerns resurfacing in the past month.
The evidence is that the tightening in financial conditions, in conjunction with other factors including rising fuel costs, is working to restrain demand. Indicators of household spending have recorded subdued outcomes over recent months, and credit expansion to both households and businesses has weakened significantly. There have also been some tentative signs of an easing in labour market conditions.
The rise in Australia's terms of trade that is currently occurring will work in the opposite direction. It will add substantially to national income and ability to spend, even with the slowing in global growth to below-trend pace that the Bank is assuming. At the same time, rising prices of oil and a range of other commodities are adding to global inflationary risks.
Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, while the inflation outlook remains concerning, the Board's assessment continues to be that demand growth will be moderate this year. The most recent flow of information has given additional support to that assessment. Inflation is likely to remain relatively high in the short term, and the CPI will be further boosted in coming quarters by the recent rises in global oil prices. Looking further ahead, inflation in both CPI and underlying terms should decline over time, provided demand continues to evolve as expected.
Weighing up the available domestic and international information, the Board's judgement is that the current stance of monetary policy remains appropriate. The Board will continue to evaluate prospects for economic activity and inflation in the light of new information.
RBA
inflation, interest rates, trade balance, AUD, RBA, Reserve Bank of Australia
Asian Forex News: New Zealand Disappoints, Japanese Inflation Hits Decade High
Jun 26, 2008
All signs point to a rate cut for the Kiwi.
New Zealand's trade deficit grew by $196 million in May. This was far worse than the expected rise of $150 million. Thats nearly a $250 million swing!
Merchandise exports were up 11.2% year over year. However, merchandise imports were up 17.3%.
This comes on the heels of yesterday's current account deficit, which was an alarming $13.8 billion, 7.8% of GDP.
Considering the strength of the Tui oilfield and dairy prices, this is indeed worrying news for the Kiwis.
To top that off, New Zealand Q1 GDP was finalized at 1.9%, slightly worse than the expected 2.1%.
And the gloomy news kept on coming out of Asia.
Japan reported a jump in inflation from 0.9% in April to 1.5% in May. This is the largest month over month increase in a decade. However, traders need to keep some perspective. Japan reintroduced a fuel tax in May, which may account for some of the rise.
Separately, Food prices rose 2.4%, Like many other countries, japan excludes food when calculating CPI.
Japan's household spending also fell -3.2% in May, larger than the expected reading of -2.2%.
On the plus side, japanese unemployment remained flat at 4%, as expected.
Relevant Forex prices At 11:30pm est
USDJPY 106.970 (-0.990, -0.92%)
AUDJPY 102.35 (-1.20, -1.16%)
EURJPY 168.28 (-0.97, -0.57%)
NZDUSD 0.7565 (-0.0008, -0.11%)
NZDAUD 1.2636 (-0.0020, -0.16%)
EURNZD 2.0786 (+0.0091, +0.44%)
inflation, GDP, CPI, JPY, NZD, Yen, Kiwi
Dissecting Fed Commentary
Jun 25, 2008
As expected, the FOMC held rates at 2% today. Also as expected, the real focus of traders was Fed commentary.
Four things stand out in the FOMC statement
1. Analysts are sensing they key comment is:
"Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."
But is it really a significant comment? While upgrading inflation risks over the previous statement, it doesn't say that inflation concerns are greater than growth. It merely says that growth trends are still downward, while inflation is trending upward.
2. Commodity prices have entered the first paragraph
The April 30th statement did not mention commodity prices until the end of the 2nd paragraph. This statement specifically warns in the first paragraph that energy prices are a risk to recovery for the next few quarters.
3. The time period for battling inflation has changed.
The real key may have been the change in time periods. In April, the Fed stated:
"The Committee expects inflation to moderate in coming quarters"
Today, the Fed specifically "expects inflation to moderate later this year and next year" (emphasis added).
No doubt this is a recognition of the recent surge in energy and the likely impact of Midwest flooding.
4. The outlying votes have changed.
In the April meeting, Richard W. Fisher and Charles I. Plosser voted to hold firm. In this meeting, Richard Fisher voted to hike 25bps. With Mishkin leaving after the August meeting, inflation hawks may start to out number the growth doves.
The next FOMC statement will be released August 5th.
Markets remained largely muted to the Fed comments. Expect the EURUSD to edge towards 1.58 resistance before the next ECB meeting.
The Full FOMC Statement
June 25, 2008
Key changes underlined
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
inflation, interest rates, oil, FOMC
FX News Under the Radar
Jun 21, 2008
Some FX news you might have missed Friday.
1. IMF upgrades US growth to 2% for 2009.
The International Monetary Fund (IMF) increased forecasts for US 2009 GDP growth to 2%. According to the IMF, The US downturn has been mitigated by well-timed fiscal stimulus, strong export growth, and healthy corporate balance sheets. However, the IMF warned of downside risks from "strains on household and bank finances, and now also by higher commodity prices."
Read the full release at the IMF
2. California Unemployment Hits 6.8%
California, hard hit by the housing crisis, hit a 2008 low in unemployment. Joblessness rose 0.6% month-over-month and was a full 1.5% higher than May 2007. The total number of unemployed came in at 1.26 million, up 300k year over year.
With the state facing a $15.2 billion deficit, things are bound to get worse. Among other proposals for a deficit fix has been an increase in already high state income taxes. Califonria's rate of 9.3% comes in 2nd only to Vermont. Higher state taxes could impose a major drag on a key component of the US economy.
3. India inflation hits 11%
India's wholesale inflation rose to 11% Year over Year. This is far higher than last week's reading of 8.75%. Unlike many other countries, India tracks inflation by tracking the wholesale price of 435 goods.
India is facing a very difficult period, as they have had to cut fuel subsidies by 10% and and just last week the central bank increased short-term borrowing rates from 7.75% to 8%.
The Sensex exchange is down 30% this year since peaking at 21,206.80 in January. The index closed at 14,571.29 Friday.
IMF, India, inflation, GDP, jobs report
UK Inflation at 3.3% YoY, BOE Governor King Dovish
Jun 17, 2008
In a surprise to many Forex traders, BOE Governor Mervyn King reacted dovishly to an inflation rate of 3.3%.
In his letter, required by the 3.3% inflation reading, King stated "If the bank rate were set to bring inflation back to target... the result would be unnecessary volatility in output and employment." King went on to state inflation will remain above target into 2009 and he expects to have to write several more letters.
In reply, Chancellor Alistair Darling, stated the rise in inflation has been "extremely moderate" compared with the 1970s and 1980s.
Clearly an imminent rate hike is unlikely.
At 7:30am est the GBPUSD has fallen sharply to 1.9477
Bank of England, BOE, inflation, dove
RBA Minutes: Inflation Uncomfortably High
Jun 16, 2008
According to minutes from the June meeting, the Reserve Bank of Australia remains on a hawkish footing. the board highlighted their inflation concern by question "whether, as a result of earlier tightening..financial conditions were exerting an appropriate degree of restraint on demand.".
The Bank indicated that inflation rates are likely to remain above the 2-3 % target band until the end of 2010. Q1 inflation was a whopping 4.2%.
Notably, the minutes did not include a significant line from the May minutes. According to the May minutes, the board had spent considerable time debating a further rate hike.
In early pacific trading the AUDUSD is at 0.94310
inflation, RBA, minutes
US Inflation Higher Than Expected
Jun 13, 2008
US Inflation numbers:
Year over year: 4.2%
May Headline inflation: 0.6%
May Core inflation (minus food and energy): 0.2%
IMO, this number all but guarantees a rate hike in the near future - no later than August.
The EURUSD has broken below 1.54 to 1.5339, the USDJPY has passed through 108 to 108.21
Greenback, inflation, CPI, USD
Greenback Moves on Retail Spending, Trading Flat Ahead of CPI
Jun 12, 2008
Bush and Congress can pat themselves on the back - at least temporarily. Consumers armed with extra cash from the stimulus package and a jump in energy prices sent retail sales higher in May.
Sales rose 1%, 1.2% excluding autos. That beat expectations for +0.5% (0.7% excluding auto) rise in retail sales.
The positive retail sales combined with InBev's $46 billion bid for Anheuser-Busch and continued down playing of ECB rate hikes across Europe lead to a strong daytime rally for the Greenback. (Notably, French Finance Minister Christine Lagard again took a pro USD stance suggesting a Euro rate hike might be off the table after this weekends G8 meeting).
The EURUSD fell to €1.542, the GBPUSD to £1.9477. On the other side, the greenback rose to $107.69 against the yen.
In early hours of the Asian session (1am est) the USD appears to be trading flat. The EURUSD (-0.09% to 1.5435) and GBPUSD (-0.06% to 1.9465) are trading slightly to the down side. The Yen is flat at 107.77.
Watch the inflation numbers at 8:30am EST! Headline year-over-year should come in at 4%, while core (excluding energy and food) should come in at 2.3%.
After your done trading the inflation report - you should probably get out of the market ahead of the weekend G8 meeting. Unless you have Trichet on speed dial, in which case, your probably not reading this blog.
G8 meetings can produce massive fundamental swings 5 factors strongly suggest a major policy shift this weekend.
1. A bullhorn like proclamation from the Fed and US govt that inflation is the top priority
2. The (not so) subtle backing down of the ECB from Trichet's comments last week
3. The dual storm of economic downturn + inflation numbers in the UK (and people worry about stagflation in the US!)
4. Softening of the Aussie and Kiwi economies.
5. The Gulf Cooperation Council's affirmation that they will peg to the Dollar when they form a monetary union.
Greenback, inflation, G8, CPI, USD
Inflation a Global Concern - Canadians Hold at 3%
Jun 10, 2008
The Bank of Canada joined a global chorus of inflation fears today, holding rates steady at 3%. Most traders had forecast a 25bps cut after the last 2 policy meetings featured 0.5% rate cuts and April inflation came in below 2%. But the writing is on the wall as the Bank stated:
"If current levels of energy prices persist, total CPI inflation will rise above 3% later this year...Against this backdrop, the bank now judges that the current stance of monetary policy is appropriately accommodative to bring aggregate demand and supply into balance and to achieve the 2% inflation target. There continue to be important downside and upside risks to inflation in Canada, which the bank will monitor closely."
The BOC joins the US, Euros, and Brits on warning of impending inflation concerns. New Zealand alone seems likely to cut rates in the near future among the major currencies.
Interestingly, Axel Weber of the ECB seemed to soften his tone from the previous week. At a speech in England, he stated that a mild winter may have exaggerated Q1 growth. Last week he was a Euro bull, repeatedly stressing the ECB was seriously considering a 25bps rate hike in July. German Q1 GDP growth came in at 1.5%, thanks in large part to unusual construction spending according to Mr. Weber.
With the recent wave of central bank warnings - watch for an interesting G8 Finance Minster meeting this weekend. The meeting, in Osaka Japan, kicks off on Friday June 13th at 7pm local (3am est). Since Forex markets will still be open, Cash does not expect a major announcement until Saturday At 1:30pm local Saturday (9:30pm est Friday), will be the Chairman's press conference. Given the spike in oil and chatter of central banks recently, it may be worth getting to the bar later than usual Friday.
Loonie, CAD, inflation, G8, interest rates
Ending Dollar Peg would Not Help Gulf States Fight Inflation
Jun 1, 2008
US Treasurer Henry Paulson met with members of the of the Gulf Cooperation Council (GCC) over the weekend. Among the topics discussed was gulf state inflation and the dollar peg. Currently, 5 members of the GCC 6 (Saudi Arabia, Qatar, Oman, Bahrain, and the UAE) peg their currencies to the dollar. Kuwait, the sixth GCC member, removed their dollar peg in May of 2007 but still faces looming inflation problems.
According to Secretary Pauslon, the GCC agrees the dollar peg does NOT drive inflation "to a significant degree". Secretary Paulson will meet with a delegation from the United Arab Emirates on Monday.
In April, both the UAE and Qatar indicated they were unlikely to remove the peg for the foreseeable future. However, On May 1st, Kuawait Finance Minister Mustafa al-Shimali indicated that some members of the GCC were considering dropping their pegs.
It is important to note the GCC buys more goods and services from Europe. As a result, a Euro peg would have actually increased inflation at a faster pace than the current Dollar peg.
Read more at CNBC
Greenback, inflation, USD
ZEW Predicts More ECB Rate Hikes, US and German Numbers Bad
May 20, 2008
As was expected, the main driving force in Euro FX trades came from the ZEW. However, the devil really was in the details, as the "what" caught traders by surprise. The German ZEW sentiment dropped to -41.4, lower than the expected increase to -37. Worse yet, German PPI came in at 1.1%, far higher than the expected 0.5% reading.
Depsite the bad fundamental news, markets moved on future expectations from the ZEW of an ECB rate hike. Wolfgang Franz, head of ZEW, supplied a mild jolt to the market when he indicated the ECB may increase rates "in the near future". For months now, many traders have thought the ECB was moving towards a rate cut - the global credit crunch, negative Eurozone consumer sentiment, and a crash in housing in many European countries was thought to portend a very bad slowdown. Nevertheless, as Mr. Trichet reiterated last week and yesterday, inflation remains concern #1 for the ECB.
In the US, wholesale inflation was up 0.2% for April, an ok number after the 1.1% jump in March. However, core inflation was worse than expected, coming in 0.4% vs the expected 0.2% increase. On top of the core inflation and record oil prices (which are just insane and way out of whack with the fundamental decline in gas demand + inventory increases), the US government raised their forecast for food price increases to a 4.5% - 5.5% range. That would be the largest annual growth since 1990. Overall, US inflation is up 3% in the last year, making it the largest increase since 1991.
In late trading, the EURUSD was up more than a cent to $1.5660, the GBPUSD was up to $1.9682. The dollar was also off against the Yen and Swiss Franc.
ECB, European Central Bank, inflation, ZEW Survey, EUR, USD
India Inflation at 3 Year High
May 2, 2008
India's wholesale index, which measures inflation at the "factory gate" came in at 7.57%. This is the highest since Novemeber 2004. The government has been battling inflation through price controls, raising bank requirements, and limiting food exports.
Read more at the BBC
India, inflation
India Inflation Hits 3 Year High of 7.41%
Apr 11, 2008
Rising food prices in fruits and vegetables, spices, wheat, and fish sent India's inflation to a 3 year high of 7.41%. The number was well above expectations, as the market expected a reading of 7.05%.
The Reserve Bank of India (RBI) is scheduled to meet April 29. The new inflation numbers has raised expectations that bank will act to curb inflation.
Read more at Times of India
Rupee, inflation
