Yesterday’s NY session saw the release of US inflation figures. The consumer price index rose only 0.1% in July as did the core, both under expectations. Year-on-year rates show slightly more pressure. Overall inflation is up 0.2%, which is still very low but up from 0.1% in the prior month and the second positive reading of the year. The core is steady at plus 1.8% which is just under the Fed’s 2% target.
Later in the session the FOMC released the minutes from the July meeting which showed that all voters agreed that better employment growth and stronger inflation readings were needed to support it’s pending rate lift-off. We did see one hawkish member ready to hike right away, while the rest believed conditions would be met soon. On a more important note, low running inflation was still seen as the biggest obstacle to a rate hike, something that is not likely to change very quickly. China was also mentioned as a concern from some members, and this was before the PBOC yuan devaluations last week, so it remains to be seen how the Fed views the issue moving forward. Overall the minutes were fairly balanced and offered no new clues for a September or December lift-off, however the subsequent USD reaction to the report could suggest that market sentiment is starting to deteriorate for a September hike.
Market pricing for a September hike is now at 35%, down from 46% prior to the release of the minutes.
The Asian session was relatively quiet with nothing of importance to note that will impact trading.
Please note that the expectation of a BOJ statement today was actually incorrect and economic calendars have since amended the error. The next statement is September 15.
Today we have UK retail sales on tap during London, followed by US Weekly Jobless Claims, US Existing Home Sales, and the Philly Fed Manufacturing Index later in the day. (See risk reports for more details)
There is no opening trade call for the session as we do not see a high probability opportunity at this time. We will continue to monitor developments throughout the day.
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Source:: Current Market Sentiment