The Fed Provide Few Surprises For Labour Day

Mid week was again a lull for UK data, with no releases at all following the rollercoaster ride we saw Tuesday when GDP, although up, missed expectations and hurt the pound. Despite the recovery during US trading we were hoping the pound couple continue to ride off positive sentiment and the raft of euro data wouldn’t knock the rally.

Unfortunately having started the day right at the top of the recent trading range, a cascade of various EU releases beating expectations gave the euro the push it needed to claw back losses. The main releases of note where German unemployment change which beat the forecast -10,000 posting -25,000, a significant change. Following that, Italian inflation data again beat all forecasts allowing the euro to continue benefitting from trader sentiment despite EU inflation figures as a whole missing target. A total of half a cent was lost against the single currency, making buying euros that bit more expensive. On a typical €200,000 purchase, the data made it around £800 more expensive.

The afternoon’s trading was all about our North American friends with numerous US releases including GDP and inflation data as well as Canadian GDP, which came out as expected. Industrial material price index and Industrial product price both missed the forecasts resulting in a cent loss for the Loonie against sterling over the trading day.

The US posted poor growth with the annualised GDP figure coming out at 0.1 percent compared to the expected 1.2 percent, a big difference. Inflation met expectations but the damage was done. The euro/dollar made some further small gains and pound/dollar gained half a cent plus sterling gained quarter of a cent against the euro. The markets then awaited the release of the Fed reserve interest rate decision and policy statement. When it came at 7pm BST it wasn’t really any surprise, with a further $10 Billion being cut from its QE program and the statement which accompanied the decision stating that interest rates would remain low at the current 0.25 percent “for some time after QE ended”. As this result, being the same stance as in the past few months, was of no surprise, there was little market reaction.

So on to today, the start of a new month and a public holiday for many counties. The Eurozone is closed for the day as is Switzerland and China all celebrating Labour Day. The UK is still in session with a range of mortgage, house price and money supply data releases. The US has a fair amount to deal with too including inflation data, personal spending, construction spending and manufacturing PMI being the most note worthy. Happy Labour Day for those celebrating and happy trading for those who aren’t.