As expected, Fed increases rates to 3.5%
As expected the Federal Open Market Committee increased rates by a quarter-point to 3.5 percent yesterday evening. It is the 10th interest rate rise in a row by the Fed since June 2004.
The gradual tightening monetary policy in the US has been viewed as aiding the dollar for much of the year, particularly at a time of static rates in the eurozone and Japan. Any reaction by the market to yesterday’s interest rate decision may be tempered due to Friday’s important release of US trade data.
Given the fact that the rate hike was a foregone conclusion, the market was instead focused on the Fed’s statement to see if the language used held any clues as to further monetary policy decisions. The FOMC's accompanying statement disappointed some traders who were expecting a more aggressive stance against inflation, the result of this was that the dollar slipped slightly.
In other news yesterday Germany's trade surplus rose to 16.8bn in June, exceeding market expectations. Exports decreased by 0.4%, whilst imports plunged 5.5% in comparison to the prior month.
In Japan The Bank of Japan left monetary policy unchanged. Once more, two of the nine board members called for a reduction of the current account target. The Japanese central bank also raised the assessment of the economy for the second straight month. Meanwhile, core machinery orders posted an unexpected strong monthly increase of 11.1% in June.
On the Economic data front today we start with Industrial Production for June released in France at 7.45am BST, manufacturing output was slightly stronger in May. In the UK we have the Bank of England Inflation report released at 10.30 am BST, due to last weeks cut in interest rates this will be carefully scrutinised.
It is widely expected that the MPC will be keen to show that the rate cut was a measure of insurance rather than something to cause panic. Finally at 7.00 pm BST in the US we have the Treasury Budget for July, which is expected to be weaker.
In early trading on Tuesday Crude oil hit fresh highs before profit taking put prices a bit lower. The external pressures which have driven the price up in the past few days still exist and most economists believe that investors were merely taking a break until the release of the US inventory data for the week ending August 5th.
The gradual tightening monetary policy in the US has been viewed as aiding the dollar for much of the year, particularly at a time of static rates in the eurozone and Japan. Any reaction by the market to yesterday’s interest rate decision may be tempered due to Friday’s important release of US trade data.
Given the fact that the rate hike was a foregone conclusion, the market was instead focused on the Fed’s statement to see if the language used held any clues as to further monetary policy decisions. The FOMC's accompanying statement disappointed some traders who were expecting a more aggressive stance against inflation, the result of this was that the dollar slipped slightly.
In other news yesterday Germany's trade surplus rose to 16.8bn in June, exceeding market expectations. Exports decreased by 0.4%, whilst imports plunged 5.5% in comparison to the prior month.
In Japan The Bank of Japan left monetary policy unchanged. Once more, two of the nine board members called for a reduction of the current account target. The Japanese central bank also raised the assessment of the economy for the second straight month. Meanwhile, core machinery orders posted an unexpected strong monthly increase of 11.1% in June.
On the Economic data front today we start with Industrial Production for June released in France at 7.45am BST, manufacturing output was slightly stronger in May. In the UK we have the Bank of England Inflation report released at 10.30 am BST, due to last weeks cut in interest rates this will be carefully scrutinised.
It is widely expected that the MPC will be keen to show that the rate cut was a measure of insurance rather than something to cause panic. Finally at 7.00 pm BST in the US we have the Treasury Budget for July, which is expected to be weaker.
In early trading on Tuesday Crude oil hit fresh highs before profit taking put prices a bit lower. The external pressures which have driven the price up in the past few days still exist and most economists believe that investors were merely taking a break until the release of the US inventory data for the week ending August 5th.
posted by Drs Search @ 11:45 AM
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