Despite disappointing data about the US, the British Pound, and the Chinese Yuan, the Forex market remains steady despite the recent negative economic data. Yesterday, the US released its February inflation numbers, which fell short of analyst expectations. This caused traders to question the Fed’s ability to continue to normalize interest rates, and the dollar’s ability to maintain its gains.
The last week has been a bit interesting in the markets, but nothing too exciting. The US Dollar has been seeing the expected impact of the Fed’s rate hike, and the Euro and Pound have been feeling the effects of the weakening economic data in the UK.
- US Retail Sales Drop More Than Expected
- No Policy Changes Expected From Fed
- Markets Lower Amid Key Meeting
The USD forex market has remained steady, trading within range against both the Dollar and Euro and with the US Dollar Index above the all-important 90 mark. This comes as US retail sales data failed to impress, posting bigger losses than had been expected. This seems to have led the Dollar slightly higher than the lows it had hit, particularly against Sterling. There also does not seem to be any likelihood of a policy change being triggered from the Fed as they start their two-day meeting, though all eyes will remain on comments they have to make. Ahead of this, markets on Wall Street opened down with traders waiting to see what will come from the meeting.
Retail Sales Figures Fall on Mixed Data Day
US Retail Sales figures for May had been expected to show a dip of 0.6% according to analysts. The actual numbers show a decline of 1.3%. This comes off the back of an increase the previous month. This would appear to be an indication that the positive spending impact of stimulus checks has worn off in the economy. Also prevalent was a big hike in producer prices. This came in at 6.6% on the year and market the largest spike in the 12-year history of recording the number. This plays into the narrative that inflation is definitely an issue the economy is facing, though the Fed remains certain of its transitory nature.
Guidance Expected From Key Meeting
The Fed is now in the midst of their two-day meeting with many in forex trading as well as other markets, approaching with caution as they wait for any significant news to come out of the gathering. This news, however, would seem unlikely to be any kind of policy change despite the disagreement which may exist within the group. Fed Chief Jerome Powell has led a committed stance that inflation will simply be transitory, though he may come under pressure to start tapering bond purchases as the economy continues to show signs of strength. Major currencies and forex brokers remain poised for any news that may move the market.
Market Caution as More News Awaited
Markets on Wall Street joined the similarly cautious tone of the forex market with a dip in numbers across the board today. Despite hitting recent record highs, all three of the major indices in the US posted losses to start the day. Traders on the street will be tuned in closely to hear of any mention around inflation issues, and how the Federal Reserve may approach tapering their asset buying. Any proposed interest rate increase, albeit even with a longer time horizon likely into 2023 could also have an impact with the focus being very much on the approach and language used by Powell in his post-meeting press conference to come later today.
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