German inflation in focus alongside the post-FOMC vibes
So, the Fed just had a play with words and didn’t really offer too much of anything new with regards to tapering. They cited progress towards their objectives but the market focused on the lack of clarity (still) on the taper timeline and the dollar fell.
Powell continued to reaffirm that the labour market is arguably the key spot to watch before making the next move, while still brushing aside inflation as ‘transitory’.
All things considered, there’s not much to work with before Jackson Hole next month.
The dollar may be down in the aftermath but I don’t see the trend persisting for too long. The Fed can only put off tapering for so long, unless they really are adamant on seeing the substantial slack in the labour market dissipate.
Barring any negative developments in the virus situation in the US, the Fed is still on track to tapering and that’s arguably the key takeaway – if not August then by December surely. The dollar should find footing as such and not fall off too drastically.
The bond market reaction will be interesting though. 10-year yields saw no reason to get back up to 1.30% and pressure back towards the month’s lows near 1.13% will continue to validate the series of lower highs, lower lows since May.
0700 GMT – Spain July preliminary CPI figures
Spanish inflation is estimated to keep thereabouts and perhaps higher than June, with the previous month recording an annual inflation reading of +2.6% y/y. Given higher cost inflation pressures still prevalent across the region, that should translate to higher consumer inflation as well in the months ahead.
0755 GMT – Germany July unemployment change, rate
0830 GMT – UK June mortgage approvals, credit conditions
0900 GMT – Eurozone July final consumer confidence
0900 GMT – Eurozone July economic, services, industrial confidence
1200 GMT – Germany July preliminary CPI figures
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.