Tag Archives: U.S. Consumer Spending

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Will The Bank Of England Inflation Report Move Sterling?

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: U.K. BOE Inflation Report @ 09.30 & U.S. PPI @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

Will The Bank Of England Inflation Report Move Sterling?

The GBP has had a favourable performance over the past year, but with the Bank of England’s inflation report due today, this could be set to change. Investors will be listening to BoE Governor Mark Carney closely for any indications of an interest rate hike this year against a backdrop of a strengthening British economy. Traders will be focusing on the British pound as the Bank of England’s Quarterly Inflation Report is one of the most important event risks this week. The big question is whether the economic landscape has changed enough for the central bank to take a more active approach to monetary policy.

After years of sluggish growth following the 2008 financial crisis, the U.K. economy has finally landed on its feet and is set to clock up a healthy 3 percent growth rate this year. However, house prices remain a concern, with a 10 percent surge over the past year raising fears of a bubble. As the economy recovers, many industry watchers have speculated that the central bank could raise interest rates from all-time lows of 0.5 percent in a bid to offset inflation. Retail sales growth also remains weak while consumer price growth slowed to 1.6 percent in March from 1.7 percent in February, dampening rate hike expectations.

Nevertheless, analysts remained convinced that the BoE inflation report could give the pound a boost and that it is due a little bounce having lost some ground recently. Major policy changes are not expected to come out of the BoE’s inflation report, with Carney likely to retain an optimistic outlook on the U.K. recovery while acknowledging spare capacity in the economy.

U.S. Retail Sales Slow, But Economic Growth On Track to Accelerate

U.S. retail sales slowed down in April after strong gains in the previous two months but the news appears to have done little to change views that the economy was poised for faster growth this quarter. Retail sales edged up 0.1 percent last month, held back by declines in some sectors including furniture and electronics, possibly due to consumers being more cautious in their spending habits as they await confirmation that the economy is, in fact, poised to accelerate. Retail sales, which account for a third of consumer spending, rose 1.5 percent in March, the biggest gain in four years. That followed a healthy increase in February, reflecting the release of pent-up demand after the severe winter. Economists, who had forecast sales advancing 0.4 percent last month, said a late Easter could have caused difficulties smoothing the data for seasonal fluctuations, causing the sharp swing from March to April. Prices for U.S. Treasury debt rose on the data, while the dollar gained against a basket of currencies. U.S. stocks rose marginally, with the Dow Jones industrial average and Standard & Poor’s 500 index both inching to record levels. Data such as employment as well as manufacturing and services industries surveys have suggested the economy regained strength early in the second quarter.

retail sales

U.S. Inflation Data Awaited As Dollar Bulls Await Increase In Consumer Prices

Dollar bulls are expecting U.S. data this week will show consumer prices picked up last month, bringing inflation closer to the Federal Reserve’s 2 percent threshold it has set for considering a rate hike. The U.S. dollar index recovered from a 20-month low of 78.906 set last Thursday after European Central Bank head Mario Draghi warned that the euro’s strength was a serious concern and that the ECB was comfortable with taking more action to support economic growth and raise inflation at its June meeting. The strength of this week’s scheduled U.S. data releases which include the closely-watched April consumer price index (CPI) on Thursday and the bearing it has on Fed rate expectations will decide whether the dollar continues its turnaround. Consensus forecasts show April’s core CPI up 1.7 percent from a year earlier, unchanged from the prior month’s reading. Sentiment regarding whether the dollar will extend gains or weakens appears to be evenly split between dollar bulls and bears. Dollar bears maintain inflation remains low and highlight the Fed’s preferred gauge of inflation - the price index for personal consumption expenditures - which has run below 2 percent for 23 consecutive months. Fed Chair Janet Yellen warned last week about the risks posed to the recovery from the U.S. housing market slowdown, suggesting that the Fed may be in no hurry to raise rates.

That sums up today’s highlights! Keep posted with all the latest news and analyst updates via our Facebook, Twitter, Google+ and LinkedIn pages.

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Just A Minute!

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the markets:

Main Trading Events Of The Day: Several today including EUR CPI Flash Estimate y/y @ 10.00, USD Prelim GDP q/q @13.30 & GBP BOE Gov Carney Speaks @15.30 GMT

WHAT WE’RE WATCHING TODAY

Big Cuts Anticipated In U.S. Fourth-Quarter GDP Growth

The U.S. government looks set to slash its estimate of fourth-quarter growth as exports and restocking by businesses were less robust than previously thought. Gross domestic product growth will probably be lowered to a 2.5 percent annual rate, down from the 3.2 percent pace reported last month. If economists’ forecasts are correct, today’s revision will leave GDP just above the economy’s potential growth trend of between a 2 percent and 2.3 percent pace. Trade is expected to account for a large chunk of the revision. A report earlier this month showed exports fell in December, leading to a bigger trade deficit in the fourth quarter than the government had assumed. Economists expect trade’s contribution will be cut down to about 1.0 percentage point. Inventories, previously reported to have risen by $127.2 billion in the fourth quarter, are also likely to be revised down. The reported increase in the stocks of unsold goods in the fourth quarter was the largest in nearly 16 years but economists expect the contribution to growth from inventories, which the government put at 0.42 percentage point a month ago, could be revised to just about two-tenths of a percentage point.

Downward revisions are also expected to consumer spending after data showed weak retail sales in November and December. Consumer spending had been estimated expanding at a 3.3 percent rate in the fourth quarter, the fastest in three years. This could be lowered to a pace of about 3 percent. As a result, final domestic demand is likely to be revised weaker than the 1.4 percent rate previously reported. Government spending is likely to be revised downward, but the impact will probably be offset by upward revisions to investment in residential construction, nonresidential structures and business spending on equipment.

US Economy

Currency News

The dollar fell against Japanese yen on Friday, after the release of a set of stronger than expected economic data. The dollar USD/JPY slid to ¥101.81 from ¥102.17 late Thursday. Japanese government data released Friday morning showed the jobless rate held steady at 3.7%, while factory output in January climbed 4% from the previous month. Meanwhile, the core consumer price index rose 1.3% last month from a year earlier, beating the 1.2% projections and marking the eighth straight month of gains for the core CPI. This indicates that the economy may be close to winning its decades-long fight with deflation. However, compared to December, the core CPI slipped 0.3%, sparking some concerns that momentum is easing.

The GBP meanwhile, firmed against the dollar after Federal Reserve Chair Janet Yellen told U.S. legislators monetary authorities were concerned with soft economic indicators though monetary policy remains on course for now. Disappointing weekly jobless claims numbers also softened the dollar. In U.S. trading on Thursday, GBP/USD was trading at 1.6680, up 0.06%, up from a session low of 1.6617 and off a high of 1.6698. More GBP news; BOE Governor Mark Carney speaks @ 15:30 GMT at a financial symposium in Frankfurt. Remarks which are more hawkish than expected will be bullish for the pound.

Will Google’s Project Ara Go On Sale Next Year?

Google’s Project Ara modular smartphones could arrive early next year, according to reports. A team within the company, which is developing the project to make smartphones composed of small, swappable pieces of hardware reportedly plans to finish a functioning prototype within weeks and begin preparation on a version for consumer sales beginning in the first quarter of 2015.

The central idea of Project Ara is to help smartphone users take handset customisation beyond ringtones, wallpaper, and body colours to the devices’ very form and function. An endoskeleton, or structural frame, would hold the smartphone modules of the owner’s choice. Google is pushing for the endoskeleton to cost $50. It will come only with Wi-Fi and no cellular connection. Users could then build up the phone how they like with various modules, like a camera, high-speed processor, speakers, and more. Developers will also be encouraged to make modules for its ambitious new phones. It will be interesting to watch developments unfold over the coming months while keeping an eye on price of Google stock.

Google Ara

That sums up today’s highlights! We hope you have a profitable day on the markets.

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