Another rate bites the dust

August 11, 2016

Everything changes in the market in a matter of hours. Today already the US Dollar declines against its major peers as lacklustre Non-Farm Productivity fell the third quarter in a row. At the same time, the rising labour cost brings doubts within the US businesses showing that the country is not out of the woods yet.

The US Dollar index which tracks the greenback against all other six major currencies lost $1, falling sharply from yesterday’s peak of 96.40 to 95.43 on Wednesday. With that the FED rate rising prospects declined massively for this year. The December’s probability of a rate hike fell to 35% from 38% the previous day. Despite the news, it seems like the odds for September and November are still showing good outcomes.

The Non-Farm productivity fell by 0.5% in the second quarter lagging behind the medium forecast for a 0.4% growth. A quarter earlier, in Jan-March period, the reports showed a productivity decrease by 0.6%.  The report played down the importance of NFP post last week which was well above the medium forecast of 180K being at 255K in July.

The Housing market in the US got positivity as the Mortgage Applications report showed 7.1% increase from a previous -3.5% reading.

The British pound, which fell sharply after the BoE decision to expand the stimulus bets, retreats slightly from a previous 1.30 level to a 1.3080 as the Dollar weakens. The EUR/USD pair rose by 0.63% to a 1.1185 level. The Australian Dollar surged on a Westpac Consumer Confidence report rising from a -3.0% in July to a 2.0% in August. The Investment lending in Australia rose by 3.2% in July, which showed a slower increase from the month before as it was 5.3% in June. The Housing Market showed signs of expansion as the Home Loans report indicated a growth average of 1.2% in June from previous -0.8% in May. The main driver for the Australian Dollar growth could be considered the speech held by the RBA Governor Stevens.

The Gold soared by 0.84% as well as the JYP/USD unwind post-NFP gains, the USD/JPY -0.67% a 101.20. The Swiss Franc added 0.50% against the American peer, declining to a 0.9760 level. The Gold erased declines despite the shattered hopes of the Oil producers, they will gather to discuss the output freeze, WTI -0.37% at 42.61, Brent -0.07% at 44.95. The investors are waiting for an official EIA estimates which is projected to show an increase in the commercial crude inventories as the preliminary API data disappointed the investors showing an increase by 5.6M barrels. Nevertheless, the focus will be on gasoline stockpiles which have become more important considering the crude surplus. The main Oli consumers are trying to see them predict the demand from the US refineries. The last report indicated that gasoline reserves decreased in the US which helped the prices to bottom out from the $40 level.

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