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Sun, May 19, 2024

Upcoming: Feds Powell to Testify the Monetary Policy Report
5 mins well spent

GBPUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel.

This week, Feds Chair Powell is going to testify regarding the semi annual monetary policy report in front of the Senate Banking Committee. We are expecting the USD to stay positive due to higher inflation rates and higher domestic data numbers. According to the Feds, consecutive rate hikes is the only way to control inflation at 2%.

US Retail Sales Climb

After two consecutive monthly declines, retail sales in the United States increased by the most in nearly two years in January. This was due to Americans increasing their purchases of motor vehicles and other goods, which points to the economy’s continued resilience despite the increase in borrowing costs. Signs of strength in consumer spending could fuel speculation in the financial market that the United States Federal Reserve may continue raising interest rates through the summer to cool domestic demand. This news follows closely on the heels of the announcement on Tuesday that monthly inflation picked up in January.

USDCAD M30 TF analysis Market is moving in the Descending channel and the market has reached the lower high area of the channel

USDCAD is moving in the Descending channel and the market has reached the lower high area of the channel.

The decrease in sales that occurred in the two months prior was attributed to consumers starting their holiday shopping early. Economists claimed that the model that the government employs to remove seasonal variations from the data did not account for the front-loading of holiday shopping to the extent that it should have. The wide increase in retail sales seen during the previous month was led by the purchase of motor vehicles, which resulted in revenues at auto dealers increasing by 5.9 percent. Despite the increase in the cost of gasoline and/or gasoline, sales at service stations remained the same.

US Retail Sales

Internet retail sales climbed 1.3 percent. Despite the fact that the pace of pay increase has slowed, the tight labor market continues to provide substantial wage growth. Since March of this year, the Federal Reserve has increased its policy rate by 450 basis points, taking it from near zero to a range of 4.5 percent to 4.75 percent.

USDJPY Daily TF analysis Market has broken the Descending channel in Upside

USDJPY has broken the Descending channel in Upside.

The majority of these increases took place between the months of May and December. It is anticipated that there would be two further rate increases of 25 basis points each in the months of March and May. The component of gross domestic product that is most directly correlated with fundamental retail sales is that of consumer spending.

Feds Waller Speech

Feds governor Christopher Waller recently gave a speech where he discussed the upcoming hot releases and what they mean for the economy. He states, “The shift in the data started with a bang on February 1, with a big increase in the number of job openings in December that reversed the gradual easing over several months in what is a key indicator of tightness in the labor market. Part of the FOMC’s plan to lower inflation is reducing this excess tightness, which has been driving elevated wage growth and contributing to high inflation.”

USDCHF H1 TF analysis Market has broken the Box pattern in Downside

USDCHF has broken the Box pattern in Downside.

“The Job Openings and Labor Turnover Survey data can be noisy so, at times, there is a tendency to downplay large moves. But then, on February 3, the job report for January showed a stunning 517,000 increase in employment, and the unemployment rate moved down to a level not seen in over 50 years. These data indicated that, instead of loosening, the labor market was tightening. A little over a week later, on Valentine’s Day, instead of a box of chocolates, we got the consumer price index (CPI) inflation report for January and revisions to 2022.”

FED Speech

“By this measure, not only had inflation stopped declining in January, it also slowed a lot less in the second half of last year than previously reported. Later that week, data on producer prices and last week’s report on personal consumption expenditures (PCE) prices reinforced these two points. Retail sales for January also came in much stronger than expected, suggesting the economy was slowing less than it had appeared just a month earlier, a picture that was confirmed by data on personal spending, which represents almost 70 percent of gross domestic product. Continuing progress on inflation depends on lowering demand and moderating economic activity, and the retail sales and spending data suggest that progress on reducing aggregate demand may have stalled.”

Feds Meeting Minutes

According to the minutes from the most recent meeting of the Federal Reserve, which were issued on Wednesday, officials have stated that there are indicators inflation is going down, but that it is not enough to counteract the need for future interest rate hikes. Although the most recent meeting resulted in a rate increase that was less significant than the majority of ones that had been enacted since the beginning of 2022, officials emphasized that their concern over inflation is at a high level.

 

EURUSD H4 TF analysis Market is moving in the Descending channel and the market has reached the lower high area of the channel

EURUSD is moving in the Descending channel and the market has reached the lower high area of the channel.

According to the minutes, inflation remained much higher than the Fed’s objective of 2%. This occurred with labor markets that continued to be quite tight, which contributed to ongoing upward pressures on prices and wages. As a direct result of this, the Federal Reserve Board approved a rate rise of 0.25 percentage points, which was the lowest increase since the first hike of this tightening cycle in March 2022. As a result of the action, the federal funds rate is now within the target range of 4.5–4.75%. According to the minutes, however, the decreased pace was accompanied by a significant level of worry on the continued risk of inflation.

After the meeting, regional Presidents James Bullard of St. Louis and Loretta Mester of Cleveland have both stated that they were among the group that desired the more aggressive step to be made. Nevertheless, the minutes did not include any more information on the size of the few or the members of the Federal Open Market Committee who supported the half-point hike. Following the meeting, officials from the Federal Reserve have expressed confidence about recent inflation figures while also stressing the importance of maintaining a heightened state of vigilance.

 

Feds Meeting Minutes

The labor market is also red hot, which suggests that rate rises by the Federal Reserve, although having an impact on the housing market and certain other rate-sensitive sections of the economy, have not yet spread to the majority of the economy. It was stated in the minutes that several members viewed the possibility of a recession as being high.

Some government officials have stated in public that they believe the Federal Reserve can prevent a recession and accomplish a soft landing for the economy, which will result in growth decelerating significantly but will not decline. The conflict in Ukraine, the resumption of economic activity in China, and the chance that the labor market might continue to be tighter for a longer period of time than was originally anticipated were some of the risk factors that were mentioned.


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